CBRE report highlights the ever-growing role of holiday season reverse logistics operations

While the 2023 holiday season is now officially in the rearview mirror, it is full speed ahead for the subsequent reverse logistics season.

That was made clear in a report issued last month by Dallas-based industrial real estate firm CBRE. The report, entitled “Reverse Logistics Revs Up as 2023 Holiday Sales Rise,” observed that with 2023 holiday season online sales pegged to increase 7%, to $237.2 billion, for the 2023 holiday season (a huge number, to be sure), according to the National Retail Federation, and online returns are expected to hit $82.1 billion (another huge number), or 30% of total sales.

This level of holiday season reverse logistics activity is, by no means, new, or an anomaly. In fact, Optoro, a reverse logistics software provider, noted in the report that the cost of returns in the U.S. is now up by a full 50%, or $149 billion, since just 2018, with the cost to return a purchase averaging 27% of the total purchase price, which the report said can reduce sales margin by up to 50%.

As for how the ever-increasing costs of reverse logistics impact industrial real estate demand going forward, CBRE explained that the expected future impact will likely by driven by 3PLs, whom accounted for almost 31% of leases of 100,000 square-feet (SF) or more through the first three quarters of last year. And it added that many of these 3PLs also offer reverse logistics services, with 3PLs having leased more than 100 million SF of bulk space on an annual basis over the past four years.

That is supported by the ongoing increase in e-commerce sales as a total percentage of retail sales, with CBRE data showing it increased from 22.8% in the second quarter of 2020 to an estimated 23.1% for the fourth quarter of 2023, with some fluctuation in between.

Another key reverse logistics theme highlighted in the report focused on the importance of return policies for customers.

According to Optoro data, 64% of respondents in a survey it conducted prefer retailers that provide the best return policies, with 44% indicating free shipping for returns “was of particularly high importance,” and another 24% stating that printing and affixing a return label or finding adequate packaging materials is a major challenge.

Based on some of these listed challenges, it appears that retailers are listening to customer concerns and acting on them. How? CBRE pointed to an Optoro survey of retailers, which indicated that 87% of retailers revised their respective returns policies last year, with some of these changes including: providing drop-off locations; charging for returns; allowing customers to keep certain returns; policing fraud; and providing an online returns portal.

Sustainability also received attention in the report, with CBRE observing that Optoro data pointed to returned inventory representing 9.5 billion pounds of landfill waste annually, or the equivalent of 10,500 fully loaded Boeing 747s.

In order to counter that situation, CBRE said that “retailers continue to look for ways to balance the demands of consumers with sustainability requirements,” adding that “many are partnering with reverse logistics technology companies and using artificial intelligence to provide better product descriptions, enhance customer experiences and increase the rate of recovery on returns.”

As usual, this report provides a great overview of reverse logistics, especially as it relates to the high-volume and high-energy holiday season. With many other parts of freight transportation and logistics are having been firmly established for years, if not many decades, or even longer, the history of reverse logistics is still very young and continues to evolve. Are things perfect when it comes to all reverse logistics processes? No, and, really, in logistics, nothing is. That said, it is on the right path and only figures to get smoother and more efficient in the coming years.