Reverse Logistics Revs Up as 2023 Holiday Sales Rise

2023 U.S. holiday sales are expected to increase by 4% year-over-year to a record $957.3 billion, according to the National Retail Federation (NRF), with 18% or $173 billion worth of returns. How efficiently these goods are added back to the supply chain through a process known as reverse logistics is a prime consideration for retailers from both a cost and environmental-impact perspective.

Online Purchase Activity on the Rise

The 2023 holiday shopping season kicked off on Black Friday with a 7.5% year-over-year increase in online sales to a record $9.8 billion. A record 200.4 million consumers purchased goods both online and in-store over the five-day holiday stretch from Thanksgiving Day through Cyber Monday, up from 196.7 million over the same period last year, the NRF reports. Of that total, 134.2 million purchased goods online, up by 3% from last year. E-commerce sales are predicted to increase by 7% to $273.7 billion this year. Of this total, it's possible that up to 30% or $82.1 billion worth of these purchases will be returned.

Figure 1: Projected 2023 U.S. Holiday Sales & Returns, $ Billions

Figure 2: U.S. Holiday Sale Return Values & Return Rates

E-commerce as a percent of total non-auto retail sales likely will surpass 23% for the first time on record in Q4. A corresponding increase in product returns also is expected. Reverse logistics company Optoro reports that the cost of returns has increased by 50% or $149 billion since 2018. The cost to return a purchase averages 27% of the purchase price, possibly erasing as much as 50% of the sales margin.

E-commerce growth will remain a key driver of industrial demand for the foreseeable future, particularly from third-party logistics (3PL) providers that accounted for nearly 31% of leases of 100,000 sq. ft. or more in the first three quarters of 2023. 3PLs, many of which provide reverse logistics services, have leased more than 100 million sq. ft. of bulk space annually for the past four years.

Figure 3: E-Commerce Sales Continue to Increase

Return Policies Important for Consumers

A recent consumer survey by Optoro found that 64% of respondents favor retailers that offer the best return policies, while 44% said that free shipping of returns was of particularly high importance. Another 24% indicated that one of the biggest challenges is printing and affixing a return label or finding adequate packaging materials.

Retailers are realizing that the ease of making returns is a key consideration for where consumers shop. An Optoro survey of retailers found that 87% revised their return policies in 2023. Key policy changes include providing drop-off locations, charging for returns, allowing customers to keep certain returns, policing fraud and providing an online returns portal. Of those surveyed, 44% increased their return and restocking fees, while 40% created or increased return drop-off locations.

To make the returns process easier and less expensive for consumers, companies such as Happy Returns, an Atlanta-based software and reverse logistics provider, offer third-party locations where consumers can make returns using a QR code rather than having to print and affix a label and package the merchandise.

Environmental Impacts

Reverse logistics has its fair share of business-related challenges, including environmental impacts. Returned inventory creates 9.5 billion pounds of landfill waste each year, roughly the equivalent of 10,500 fully loaded Boeing 747s, according to Optoro. Retailers continue to look for ways to balance the demands of consumers with sustainability commitments. Many are partnering with reverse logistics technology companies and using artificial intelligence to provide better product descriptions, enhance customer experiences and increase the rate of recovery on returns.

Figure 4: Reverse Logistics Flow

It’s important for distributors and manufacturers to consider reverse logistics operations when making real estate decisions. Anticipating continued e-commerce growth, customer return preferences and sustainability challenges are key components of such determinations.

For more information on holiday trends, please refer to CBRE’s 2023 Holiday Trends Report.

Optoro, a Washington, D.C.-based reverse logistics provider, collaborated with CBRE on this report.