Exponential Growth in E-commerce Return

The pandemic-induced boom in online shopping and e-commerce saw sales soar to an impressive $1.2 trillion between 2022 and 2023, highlighting a remarkable shift in consumer behavior. However, this shift came with its own challenges, primarily due to more lenient return policies and the inherent limitations of online shopping, such as the inability to physically inspect products before purchase.

Consequently, this led to a significant uptick in the e-commerce return rate, culminating in approximately $816.8 billion worth of goods returned across both online and brick-and-mortar sales — a figure that continues to grow year over year.

High Cost of Reverse Logistics

According to Reverse logistics company Optoro, the cost of processing return could be, on average, up to 66% of its sale price, depending on categories (e.g., 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) when accounting for all costs of reverse logistics, discount loss, and liquidation. Below Chart will have the breakdown of this 66% (e.g., average $33 in processing fee or 66% value of a $50 product).

Poor Economics of Bulk liquidation andResell channels

Selling returned inventory directly to end users offers significant value, yet finding an optimal solution remains elusive in our current landscape. The economics of bulk liquidation and other resale channels often yield poor returns, as they struggle to match the tight buyer specifications required. Waiting to receive a bid at the warehouse or settling for mere cents on the dollar in bulk liquidation scenarios are simply not viable options, particularly for small and mid-size brands. Thus, there is a pressing need for a more effective and sustainable approach to connect returned inventory with end users, one that maximizes returns for brands while offering desirable products to consumers.

Environmental Concerns

The environmental conversation surrounding returned inventories ending up in landfills creates significant implications for sustainability and brand reputation. Online sellers, including Amazon third-party sellers, often face multiple return disposition options, with disposal being potentially 33% cheaper than grading or reselling. Unfortunately, due to cost considerations and limited recovery rates with bulk liquidation companies and auction marketplaces, many opt for landfill disposal when lacking in-house processing capabilities. This trend is not exclusive to Amazon; even luxury brands sometimes prioritize brand protection over sustainability, as seen in instances of burning high-end products by companies like Burberry or Cartier. This delicate balance between cost management and brand exclusivity underscores the broader challenge of aligning economic efficiency with environmental responsibility.