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The rise of the returns What happens to the things we send back?


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Business Spotlight - epaper ⋅ Ausgabe 10/2022 vom 21.09.2022

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A fleet of trucks lining up at an Amazon delivery station in Chatsworth, California

MEDIUM US

For consumers, it’s so easy. We buy a product online. Somebody brings it to us. If it’s not the right thing, we simply send it back. But what actually happens to all the things we send back? For various reasons, many products cannot simply go back on the shelf as new. The pandemic caused a huge rise in ecommerce — and a corresponding rise in returned items. Globally, retail returns are worth more than half a trillion dollars.

In the early days of online shopping, many consumers were reluctant to buy things they couldn’t touch or try on. The answer was free returns. Once you’ve given your customers something, it is very hard to take it away, so online retailers have little choice but to continue offering free returns. But reverse logistics, as the management of retail returns is known, is complex and expensive. Someone has to pay for the return shipping, then employees must ...

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... sort through truckloads of returned items to decide what to do with them. Faulty items are returned to the manufacturer, others may be resold as used or perhaps new — if the packaging hasn’t been damaged. Still, other items will be sold cheaply to a liquidation firm or given to a charity or, in the worst cases, sent to a landfill.

Online purchases generate more returns than instore purchases, because customers can’t touch items before they buy them. The U.S. National Retail Federation says the rate of returns increased from 10.6 percent in 2020 to 16.6 percent in 2021 — with a record $761 billion of merchandise returned last year. This hurts retailers’ profitability and sustainability goals.

Reselling returns

While returns mean significant costs for retailers, they open up opportunities for others. Resellers buy up returned items, from liquidation firms or directly from Amazon, and resell them at a profit. Joe Rensing began his reselling career about ten years ago, first reselling things he owned but didn’t want anymore, then expanding into reselling things he had bought from liquidation firms. Now, he and his wife, Jessica, are full-time resellers.

The couple are known online as The Family Flips (). They buy up returns and divide them between their online store and their physical store, The Family Flips Marketplace, in Conway, Arkansas. The Rensings sell up to 20,000 items and generate about $75,000 in revenue a month.

Although manifested truckloads come with a list of the items on board, there are always surprises. “You may be missing some of the items that are on the manifest,” Joe Rensing explains. “Sometimes, you’ll get items that are really good that weren’t on the manifest.” And some items arrive broken or incomplete. Jessica remembers a box with a $4,000 porcelain sink inside, which had “shattered into a million pieces.”

For online sale, the couple choose items with a high profit margin, such as designer clothes, sports equipment and other specialty items, but especially electronics. “Apple products maintain their resale value even if they’re broken. They’re high-demand items,” Joe explains.

Almost everything else goes into the couple’s store, one of many “bin stores” that have opened all over the U.S. recently — especially in the pandemic, which produced not only the increase in returns but also in empty commercial real estate as businesses closed down.

At around 2,800 square feet (260 square meters), The Family Flips Marketplace is a typical size for a bin store. It operates on a falling-price model: On Friday, when the store has been restocked, everything costs $10; the next day, it’s $6; and by Wednesday, it’s just $1. The store has tens of thousands of items, mostly unsorted. “People love to search for deals,” Jessica says. “I think if we categorized too much, it would take away from the mystery of the treasure. That’s really what it is: a treasure hunt.”

The high price of cheap stuff

How many of all the returned items go to resellers like the Rensings is difficult to estimate — major retailers like Amazon, which generated over $469 billion (€457 billion) in net sales revenue last year, don’t report those figures. Optoro, a reverselogistics technology company, estimates that, in 2020, U.S. returns caused 16 million metric tons of carbon emissions and 5.8 billion pounds (2.6 billion kilograms) of landfill waste.

Jessica Rensing had an emotional response to discovering the cost of reverse logistics. “I actually remember crying one night,” she says. “But I realized that I can only do what I can do. We can give really good deals on these items that would otherwise end up in a dumpster. We can feed our family on that paycheck. We can recycle.”

The couple say they try to find buyers for broken items, either by selling the spare parts or offering them to upcyclers, for example. They are also careful to buy only what they need. Jessica explains that the excitement of getting something disappears quickly, and “you’re just left with a bunch of junk in your house.”

While resellers generally work at the cheap end of the retail market, they also feel the effects of high inflation. The Rensings say inflation has doubled their freight costs, for example, but they don’t want to pass on the extra cost to their customers. “It’s not just about the bottom line to us,” says Joe. Both he and Jessica are ambivalent about the economic and environmental cost of reverse logistics. “I just know that America cannot continue its current consumerist nature. It’s not feasible to do so.”

* This symbol marks standard US pronunciation.

UPCYCLE, RECYCLE, DOWNCYCLE

Not all recycling is the same. It depends on the product and how many different materials are in it. Upcycling converts material into something more valuable than the original — such as making trendy bags from old car seat belts. Recycling puts material back into the same lifecycle as before, creating something that’s of roughly the same value. Downcycling converts material into something of less value than the original, creating a lower-grade product. This happens a lot to paper and plastic, which don’t have the same high quality after processing.