Americans love to shop. They also love returning the gifts they don't love.
Last holiday season, customers returned a record 1.4 million packages by January 3, 2018, according to UPS figures—an 8 percent increase over the previous year. Optoro, a firm that specializes in return shipments, estimated that $90 billion worth—roughly the GDP of Slovakia—of goods were returned during the 2017 holiday season. (The firm estimates that about a quarter of all returns happen around the holiday season). And this year, you can bet those figures will only be higher, thanks to one factor in particular: lax return policies
Retailers may promise you "free gift returns," but sending back the items you don't want can actually end up costing quite a bit of money. (Don't worry: It's not your money.) About a quarter of items are returned directly to the manufacturer, while the rest go to secondary retailers. Either way, the seller has to eat the cost of the return.
"They simply accept it as a price of doing business," says Jonathan Byrnes, a senior lecturer at MIT's Center for Transportation & Logistics told CNN.
Upon receiving the returned item, the retailer has to cover the cost of assessing the condition of the product and repackaging it. If it's in near-perfect condition, it can be put back on the shelf and resold at full cost. Unfortunately, less than half of all returned goods are in such good shape (48 percent, to be exact, according to a Gartner survey of 300 retailers). A percentage of those that are not in good enough shape to resell may be sold for a fraction of their original value to discounters and liquidators, and end up at regional wholesalers.
CBC gives the example of Liquidity Services, which sees about 50,000 items move through its facility every couple weeks due to some kind of issue with the product. These are then packed up and sold at a steep discount to bargain retailers—dollar stores, eBay sellers, and flea markets. These buyers pay a dirt-cheap price for a pallet of merchandise with no description of the products outside of a general category, such as "homewares." Or, for a slightly more-than-dirt-cheap price, they can get a pallet of product that includes a manifest describing what is actually in the batch of stuff. If the buyer is picky about what it sells, they may be picky about what it buys.
The rest of the products just get tossed. Tobin Moore, Optoro's CEO, estimates that 30 to 40 percent of goods that are returned to retailers end up getting thrown out altogether because of the additional costs they create in order to go back up the supply chain.
"Certain goods, if it's a higher-value product in a stronger brand, like an iPad or iPhone, it will come back and we can resell it for 80 percent of the value," he told CNBC. "However, if it's a lower brand that's not as well-known, and it's clothing and $20 originally, it may be worth pennies on the dollar." And if you'd rather not inadvertently contribute to this vicious cycle, buy present that no one will return by checking out these 50 Gifts So Great You'll Want to Buy Them for Yourself.
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