E-Commerce Logistics Chains May Not Be Ready For An Unprecedented Post-Holiday Returns Onslaught
With e-commerce expected to dominate holiday gift sales in 2020, the industrial logistics chain may face unprecedented demand after the holidays when gift receivers return unwanted goods en masse to retailers, a new report from CBRE says.
E-commerce returns are expected to increase 73% from the prior five-year average, reaching $70.5B after the 2020 holiday selling season, according to a new CBRE report. The National Retail Federation estimates online holiday purchases will grow 40% from last year to $234.9B in 2020. Data varies about the average rate at which consumers return products bought online, with reports ranging from 8% to 40%.
This rise in e-commerce is credited to growing online purchasing in the midst of a pandemic, but with most retailers accustomed to in-person returns after the holidays, CBRE warns that the reverse supply chain that moves returned items back to retailers could be strained after the holidays.
"Reverse logistics has been challenged to keep the same pace with return orders in recent years, and they will really be put to the test this year. The hope is that companies that are in demand, or continue to be in demand, have already underwritten these costs and capacity needs into their holiday fulfillment strategies," CBRE Dallas Senior Vice President Travis Sapaugh said in a statement.
CBRE partnered with tech firm Optoro on the report and, using the provider's research, found that on average a logistics supply chain requires up to 20% additional space and labor to handle reverse logistics operations when products are returned. As of the third quarter, 22 U.S. markets had vacancy rates below the national average of 4.7%, CBRE said, creating a situation where capacity is likely to be stretched thin when returns come back through the pipeline.