Every year, as the holiday and Christmas season begins, Halloween, Black Friday, and Cyber Monday lead up to really big discounts, ensuring that huge amounts are spent. But right after the holidays every year, as we slide into the new year, the deluge of returns begin. According to the National Retail Federation, $761 million in retail purchases were returned in 2021, up from $309 million two years earlier. In fact, retailers can expect costs including customer care, transportation, processing and liquidation to amount to nearly 60% of the sale price of a $50 item.  

The five-day holiday shopping period from Thanksgiving Day through Cyber Monday generated a record 196.7 million shoppers across the US in 2022, and they each spent an average of $325.44, according to the National Retail Federation. That was a big boost for retailers, but also a reminder that the intoxicating level of holiday retail sales can leave a big hangover when it comes to returns.

The combination of online shopping habits and consumer-friendly policies have turned the nagging problem of returns into a major business concern– one that cuts into profit margins and undermines inventory planning and forecasting. Post holiday reverse logistics is a concern that every player in the supply chain is familiar with. The growing variety of items offered on e-commerce sites has exacerbated the problem, with a range of products from home goods and clothing to appliances and furniture vying for attention. 

The first step in solving the problem is to appoint an executive responsible for the end-to-end returns process. And then a company needs to measure both customer satisfaction and the detailed cost of returns. Researchers at the University of Tennessee have broken the returns process into five “pathways” to help returns executives better understand improvement opportunities. These can be called pre-sale, initiation, induction, network & processing and disposition. The best way to mitigate returns costs, of course, is to find ways to limit returns before they happen, in the pre-sale process. But essentially, stakeholders need to study reverse logistics and figure how best to reduce returns to avoid and mitigate the whole mess.