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In the Loop

Cleaning up the waste of e-commerce returns

Internet sales are a massive market — but with high rates of returns and half of those going to the landfill, something has to change.

This was adapted from the Circular Weekly newsletter, running Fridays. Subscribe here.

I write this week from (surprisingly sunny) Seattle at SPC Impact, the Sustainable Packaging Coalition’s annual conference. In addition to hearing the phrases "circular economy" and "life-cycle assessment" more times than I could count, I spent the week discussing the delicate balance among function, cost, customer experience, sustainability and scale when it comes to packaging.

And when these conversations take place just blocks from Amazon’s world headquarters, the implications of e-commerce are hard to ignore.

I had the pleasure of moderating a discussion on the waste created by e-commerce returns, a panel that barely scratched the surface of this multifaceted, dirty little secret of online retail.

The scale is significant: The 23 percent annual growth of e-commerce means continuously more packaging and returns. Compared to traditional brick-and-mortar retail, which has a return rate of 8 to 10 percent, customers return 15 to 30 percent of online purchases, according to CBRE’s annual Reverse Logistics Report. Of these returns, less than 50 percent are restocked and sold at retail. The rest may be sold at a discount to secondary retailers and liquidation services, but it’s often cheaper for retailers to avoid the hassle and risk, and opt to send returns to an incinerator or landfill

The returns process isn’t just wasteful — it’s expensive. In the United States alone, return deliveries will cost companies $550 billion by 2020, 75.2 percent more than four years prior, according to Statista.

Compared to traditional brick-and-mortar retail, which has a return rate of 8% to 10%, customers return 15% to 30% of online purchases, according to CBRE’s annual Reverse Logistics Report.
Of course, where there’s waste, there’s opportunity. A growing number of companies are working to capitalize on this problem while cutting down waste to landfills and incinerators. Optoro, for example, is working with retailers to optimize the returns process, using machine learning and predictive analytics to make sure returned items are kept at their highest and best use.

Finnish company RePack helps curb packaging waste via a reusable and returnable packaging service already used by 50 clothing brands in 10 countries. During our panel, RePack CEO Jonne Hellegren shared that the streamlined returns process has boosted brand loyalty and improved customer experience.

The start-up Happy Returns offers physical drop-off locations for online shoppers of some apparel retailers, streamlining takeback logistics and eliminating the customer "arts and crafts" project of printing out a shipping label and mailing the return themselves.

As e-commerce continues to increase in market share, retailers will need more solutions to cut down on the waste from returns. In many respects, this is the lowest hanging fruit of the circular economy.

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