Sustainable Returns: How Retailers Are Prepping for the 2022 Holidays

In 2021, e-commerce boomed. Consumers spent $870.78 billion online last year, and according to the National Retail Federation (NRF), returns resulted in $761 billion in lost sales for U.S. retailers. As we near the halfway mark of 2022, retailers are getting organized around the holiday season to prepare for more online shopping, more delays and more returns.

Retailers have started moving from a “prevent” mindset to embracing returns as part of the post-purchase customer experience. Rather than make returns difficult, retailers aim to win loyalty through a stellar returns experience. However, there's an environmental cost. Just last year, 9.6 billion pounds of returns ended up in landfills in the U.S. In addition, 27 million metric tons of carbon dioxide were emitted purely from returns being shipped from consumers to retailers to liquidators, and so on.

The cost-benefit returns tug of war is on full display. However, with growing returns and the fight for customer loyalty, retailers need to take steps to handle all the returns that come back so they don’t just end up in landfills. Here are the biggest areas for retailers to watch and prepare for as we near the holidays.

Retailers Told Customers to 'Just Keep it'

A 2021 CBRE report estimated that it costs 66 percent of the price of a $50 item for retailers to process a return — up from 59 percent in 2020. As a result, many retailers and brands rolled out "customer keep" returns to avoid the cost altogether.

While many applaud this method as a way to delight customers, there's an environmental consequence to consider. If a product is damaged or the wrong size, what will a customer do with it? Oftentimes, they’ll throw it away.

If it’s not worth it to ship an item back to a warehouse, retailers need to help educate consumers on what to do with the unwanted item. Chewy, the pet product retailer, suggests customers donate their items instead of returning or throwing them away. And Brooklinen allows customers to return washed or used sheets, pillows, etc., which it then sends to a donation center. Retailers can even guide customers to resale channels to keep products in the circular economy.

More Flexible Policies Led to More Buying With the Intent to Return

For much of the past two years, consumers were forced to make purchases sight unseen, and brands loosened return policies with free return shipping. As a result, retailers saw a spike in bracketing — i.e., purchasing multiple sizes or colors of the same item with the intent to return what isn’t wanted. While bracketing isn’t inherently bad, it takes a toll on the environment.

It’s up to retailers and brands to take responsibility for the system they designed and manage the fallout. That starts with helping consumers select the right items in the first place. Some retailers use software like Truefit, which steers customers to the right-sized purchase based on what they wear from other brands. And this year, Pinterest launched “Try On for Home Decor” where consumers can use a camera lens to virtually “visualize” furniture from brands like West Elm, CB2, Wayfair, and Crate and Barrel, in their homes.

Resale Puts Returns Back on the Market

In 2021, returns led to a skyrocketing resale market. Companies like lululemon, H&M, and Ikea have launched their own resale platforms. Some retailers, like Best Buy, offer open box returns at a discount through outlet channels, while others, like furniture brand Floyd, offer a program in which it inspects and grades returned furniture and lists it on its website at a 15 percent to 50 percent markdown.

As e-commerce continues to grow, resale is a great option to give products a second life. It not only fuels the circular economy, but also gives retailers an opportunity to expand their customer base.

Online shopping and the demand for an eco-friendly retail experience are only continuing to grow. Retailers and brands have a responsibility to build out transparent, sustainable returns processes. By applying new technologies and listening closely to consumer feedback, the industry will keep the circular economy turning — leaving retailers, consumers and the environment happy.

Meagan Knowlton is the director of sustainability at Optoro, an all-in-one returns platform to delight customers, drive revenue, and preserve the planet.