'The planet pays': An underrated cost of holiday gift returns

·Assistant Editor
·4 min read

With the season of giving comes the season of returning.

A report by Optoro and CBRE forecasted that 30% or $66.7 billion worth of products will be returned this holiday season, a figure that has been on the rise for the past five years, driven largely by e-commerce growth.

The record amount of anticipated returns could create unwanted effects: The influx of additional items may inflame already strained supply chains and lead to greater impacts on the environment.

Projected returns made this holiday season are expected to rise. (Optoro, CBRE)
According to Optoro data. two-thirds of consumers will return at least one gift during the holiday season. (Optoro, CBRE)

“We're all paying for it,” Optoro President and Co-Founder Adam Vitarello said about gift returns on Yahoo Finance Live (video above). “The cost gets passed on to retailers, over $20 per return. And so they pass that along to consumers. And we all pay for having an inefficient returns process.”

Vitarello added that "even bigger picture, the planet pays because many of these goods actually go into landfills. Almost 6 billion pounds of returns end up in landfills every year, and that's something that isn't nefarious, but just is the byproduct of an inefficient system.”

Making holiday returns greener

There are ways of minimizing the gift return damage, according to Vitarello.

“I think people — both consumers and retailers — need to be conscious of the decisions they make around returns,” he said, adding: “I don't think it's fair to say that if a retailer sends you something and it doesn't fit, you've just got to keep it because it's going to have a bad environmental impact. I think, more importantly, retailers and consumers need to choose ways of dealing with returns that are more ecologically friendly."

Packages from Amazon under a Christmas tree. (Photo by Sean Gallup/Getty Images)
Packages from Amazon under a Christmas tree. (Photo by Sean Gallup/Getty Images)

One way consumers can lower the carbon footprint of their returns is by taking items back to a brick-and-mortar store rather than sending them by mail.

Vitarello highlighted an Amazon (AMZN) feature as an example of a more efficient returns process: “For example, Amazon actually shows you when you go to return it [that] this is the most sustainable option to return it to store. We think innovations like that are really going to drive better customer behavior.”

And while it's important for customers to understand the downstream effects of returns, it's also incumbent on retailers to “have good systems to repurpose these goods and not just kind of throw them away,” Vitarello said.

“Even something innocuous or seemingly innocuous, like telling a customer to keep a good is actually really bad for the environment because most customers, something like 70% to 80% of customers, that are told to keep something end up throwing it away,” he explained. “And so we would tell retailers, rather than do that, let them return in-store where it's really cheap, and then repurpose it right from there.”

An employee scans packages at Amazon's JFK8 distribution center in Staten Island, New York, U.S. November 25, 2020.  REUTERS/Brendan McDermid.
An employee scans packages at Amazon's JFK8 distribution center in Staten Island, New York, U.S. November 25, 2020. REUTERS/Brendan McDermid.

The Optoro and CBRE report recommended that retailers move toward a hybrid store model, which is better equipped to handle returns and reverse logistics. It also noted that retailers can cut down on returns by enhancing their online customer experience with new features like augmented reality and virtual try-on.

And while retailers often have focused on the beginning of a product's lifecycle — its design, materials sourcing, production, and sale — the push to reduce carbon emissions and waste in consumer goods has led some companies to find ways of managing products' end-of-life as well. Companies like Patagonia have created recycling programs that collect used items and returns and feed them back into new products.

“On the flip, it's a big opportunity for retailers because this is actually a great source of inventory,” Vitarello said. “So rather than having to ship the goods over from the Far East or from overseas, you can actually just repurpose these returns and get them back in the hands of consumers.”

Grace is an assistant editor for Yahoo Finance.

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