Holiday e-com spike to lead to record returns in US

15 Dec '20

3 min read

Pic: Shutterstock

Given the significant shift to e-commerce during the pandemic, a greater share of US retail holiday sales will be done online, says CBRE Research. Holiday e-commerce sales grew by a record 14 per cent last year to $167.8 billion. This year’s projection is a 40 per cent rise to $234.9 billion, putting e-commerce’s share of total retail sales at 32 per cent.

Supply chains will be tested as retailers handle a record number of returns, according to CBRE Research’s US Industrial & Logistics ViewPoint: Reverse Logistics Stress Test 2020.

Up to $70.5 billion worth of these holiday purchases are expected to be returned, creating challenges for retailers as a surge of products are pushed back into the supply chain—a process commonly known as reverse logistics.

Brick-and-mortar retail return rates typically average between 8 per cent and 10 per cent of total sales throughout the year, according to eMarketer. Total holiday retail sales (November and December) are expected to reach $741.2 billion this year, up just 1.5 per cent year on year.

The surge in e-commerce demand this holiday season will lead to a corresponding spike in returns, according to Optoro, a reverse logistics software provider.

E-commerce sales have a much higher average return rate of up to 30 per cent, and this is even higher during the holiday season. This year, e-commerce returns will be at least $70.5 billion—a 73 per cent increase from the previous five-year average, according to a company press release.

This flood of returns back into the supply chain will create significant reverse logistics challenges for retailers and third party logistics (3PL).

Reverse logistics is creating opportunities for 3PL operators, which drive a large amount of industrial real estate demand. In the first three quarters of 2020, 3PLs accounted for 27.1 per cent of industrial leasing volume for deals of 100,000 sq. ft. or more.

Many companies that currently occupy second-generation space are expected to upgrade to newly constructed buildings, which will allow reverse logistics occupiers to lease a greater portion of Class B space. As much as 400 million sq. ft. over the next five years could be used to process returns.

Retailers must balance consumer demand with sustainability commitments while providing a seamless returns experience to protect brand and customer loyalty. Effective real estate and supply chain management can help ease the stress of holiday returns.

Fibre2Fashion News Desk (DS)

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