CBRE: High Volume and an Earlier Start to Online Returns This Holiday Season Expected to Put More Stress on Already Challenged Supply Chains
December 21, 2021
According to the report, e-commerce returns this holiday season could total as much as $66.7B, a 45.6 percent increase over the five-year average. The forecast is based on National Retail Federation data, which estimates online holiday purchases (November and December sales) will reach $222.3B.
“In order for the e-commerce model to work, consumers have to be able to return and exchange product seamlessly. This puts an extra burden on supply chains and is incredibly more expensive than the initial delivery,” said Tom O’Loughlin, Executive Vice President with CBRE in Fort Lauderdale.
He explained further, “Think about the complexities of having to go out, pick-up a single item, put it back through the supply chain, re-stock it, re-inventory it, re-pack it and make sure it is in perfect condition. The alternative is to just liquidate it at a large discount. However, without this option consumers would be less willing to hit the ‘buy’ button online. As a result, we are starting to see niche 3PLs and specialized fulfillment companies that handle the return and/or exchange side of the business occupy industrial spaces across our marketplace.”
Adding to volume challenges, this year retailers may face an elongated return season, as earlier buying may mean earlier returns if shoppers decide to return gifts before giving them. According to Optoro, 41 percent of consumers plan on shopping earlier this year in an attempt to avoid product scarcity and supply chain delays.
And the cost to process all the returns is going up: A $50 item could amount to 66 percent of its sale price on average—up from 59 percent last year—when factoring in the costs of customer care, transportation, processing, discount loss and liquidation. High-value electronics, such as laptops, tablets and cell phones will see the highest reverse logistics costs in terms of total dollar cost per unit, according to Optoro.
"E-commerce holiday gift returns have always been a significant challenge for retailers, but this year will be particularly difficult," said John Morris, Executive Managing Director and Industrial & Logistics Leader. "With the growth of e-commerce during the pandemic and the increasing costs across a bruised supply chain, reverse logistics will be tougher and more costly than ever before for retailers this holiday season."
Additionally, returns (reverse logistics) require up to 20 percent more space and labor capacity than the original order fulfillment process (forward logistics). This creates additional challenges given that industrial space is already historically tight, with third-quarter U.S. vacancy rates at a record low of 3.6 percent, according to CBRE.
Read the full report here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.