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Reverse Logistics Key to Retailers’ Holiday Success as Online Sales Surge
Retailers’ efficiency in limiting and handling returns of merchandise bought online will make or break the holiday season for many this year, according to CBRE. That’s because e-commerce is claiming an increasingly larger portion of holiday retail sales, which could amount to as much as $32 billion this year.
“Speed and efficiency in processing e-commerce returns, with an eye toward preserving as much value of the merchandise as possible, often separates the top-performing retailers from the not-so-successful ones in the weeks after Christmas,” said David Egan, CBRE Global Head of Industrial & Logistics Research. “This intricate process requires many components, including a precise network of warehouses for handling returns, robust inventory management systems and extensive customer analysis on the front end to limit the probability of returns.”
Those well-positioned to thrive in the online-returns market – also called reverse logistics – include third-party logistics firms and owners of 3PL facilities, according to CBRE. Many retailers opt to contain costs and preserve their retail focus by outsourcing reverse-logistics functions to 3PL firms that specialize in that field.
Historically, returns of store-bought merchandise have amounted to 8% of total retail sales. However, for e-commerce, that share ranges from 15% to 30%, depending on the product category.
Assuming that those percentages hold true, the value of returns this season will increase by the same 13.8% that Adobe Analytics predicts for the increase in online sales this season. Adobe foresees online sales this season reaching $107.4 billion, up from approximately $93 billion last year. By extension, CBRE calculates that the projected ceiling for returns is $32 billion, up from roughly $28 billion last year. This is putting an ever-greater emphasis on reverse logistics.
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