Returns not only pose financial costs but also environmental ones

From crafting the perfect policy to navigating logistics, returns are a tasking component of operating a retail business.

But what is the ultimate cost of returns? For starters, not all returned products make it back to shelves, and that means they often are relegated to a landfill, which has a major impact on the environment, experts told Retail Brew.

As we previously reported, the financial impact to retailers is great: total returns in 2021 accounted for more than $761 billion in merchandise last year. Plus, it’s estimated $135 billion in goods will be returned in the United States between Thanksgiving and the end of January, a 12.5% increase from 2021, according to Optoro.

But the environmental cost of returns is also great. It’s a component of the returns process that some consumers might not be aware of, even among those who strive to shop in an environmentally conscious manner.

• Returned inventory creates 9.6 billion pounds of landfill waste each year, and emits more than 27 million metric tons of carbon dioxide—the equivalent of a year’s worth of driving for 5.9 million cars, per Optoro.
• The problem is more pernicious with e-commerce, given that online returns resulted in 14% more waste than in-store in 2021.

“You’re losing a ton of value in markdowns that occur and goods that don’t get back to stock, which is a lot of cheaper goods and larger items where it doesn’t make economical sense to fully process the goods,” Tobin Moore, CEO and co-founder of Optoro, told Retail Brew. “A lot of those goods end up just going straight to landfills.”

Fitting in: Apparel is a category notorious for high return rates. Last year, 12.2% of apparel products were returned, second only to auto parts (19.4%), according to the National Retail Federation. And as more purchases are made online, rates increase as customers don’t have fitting rooms and often resort to bracketing, or buying multiple sizes at the same time with the intention of returning those that don’t fit.

• More than half (58%) of consumers tend to bracket their purchases, according to a Navar study.
• In the US, there’s an estimated 11.3 million tons of textile waste, according to the EPA.

“The more we return, the more there is a possibility that clothing is not getting back on the shelves,” Whitney Cathcart, co-founder and CCO of virtual try-on company 3DLook, told Retail Brew. “If it doesn’t sell at the discounter, it winds up in the landfill.”

3DLook’s virtual try-on technology helps shoppers find the perfect fit for the body type on the first purchase, minimizing the need for returns. The company says that it has been able to drive down returns 6% through its virtual fitting room technology called YourFit.

Optoro’s technology is an end-to-end solution that automates the entire returns process and ensures a product is put back on the shelf at full price, sent to resale, wholesale, or even donated to charity, depending on its condition.

• Optoro’s clients include Ikea, American Eagle, and Best Buy.

Moore said it’s essential retailers have avenues such as these to send returned products to where it makes sense financially. “You need to not just have DTC for all items that come back, because it’s not going to make sense for your $20 T-shirt that’s getting returned to go back to all that process again.”

The big picture: There’s no one-size-fits-all solution to returns. As we’ve previously reported, it’s one of the biggest obstacles retailers face, but an obstacle that leaves a lot of opportunity to shore up bottom lines and reduce the environmental impact, which many retailers make part of their company ethos.