Returns: The Retail Sustainability Challenge

Returns are the biggest problem facing retailers' bottom lines and a problem for our planet.

In April of 2022, scientists across the globe risked arrest in one of their most coordinated and pleading demonstrations to demand action against climate change. The writing is on the wall: We are running out of time to take swift action to save our planet. Retail in particular has a colossal carbon footprint, and industry leaders are beginning to take this issue seriously, with many legacy retailers accelerating their climate action towards the Race to Zero.

While a goal of net-zero emissions may seem daunting given that each link on the value chain imposes a heavy carbon footprint, the analysis and prevention of product returns presents an opportunity for retailers to become more sustainable. Pandemic-spurred ecommerce buying has sent returns through the roof: In 2021 retail trade grew by 14% compared to 2020. Returns increased by 78%. It’s no secret that returns are a financial challenge for retailers, and the environmental impact is staggering. Addressing retail returns can significantly reduce impact on the environment across three key areas: landfill, packaging and plastic waste, and carbon emissions.

The Dirty Truth About Product Returns

Most consumers assume they return an item to the store, and it gets reabsorbed into stock. Repackaged, re-tagged, sold off somehow. The reality is far less clean: many returned items are thrown away or destroyed. The industry estimates that 25% of returns are discarded, amounting to 5.8 billion pounds of returned goods sent to landfill each year—up nearly 1 billion pounds from just 2 years ago. And ecommerce returns produce 14% more landfill waste than brick-and-mortar returns, thanks to inefficiencies in traditional reverse logistics.

Returns Are Toxic

Returns waste includes single-use plastic packaging and items from 2 product categories with the highest return volume: Fashion Apparel and Consumer Electronics. And what happens to those discarded pants and tech returns? They leach chemicals and microfibers into the ground and water. In fact, 35% of the global total of microfibers in the oceans comes from clothing and textiles, impacting wildlife and water pollution around the world. And e-waste contains hundreds of substances, many of which are toxic, such as mercury, lead, arsenic, and flame retardants.

Reverse Logistics & the Road to Ruin

The cumbersome and time-consuming process of getting a return from a customer back up the supply chain—reverse logistics—is one of the most expensive non-revenue-generating activities in a retailer’s business. It also happens to have a massive carbon footprint. Because the average journey of a returned good can amount to 1,200 miles in distance, 16M metric tons of CO₂ are emitted from the transportation of returns, annually. Fashion and apparel in particular are one of the worst offenders, contributing up to 10% of worldwide carbon emissions (and ranking 2nd in global water consumption). 

So what can be done?

Returns are not only the biggest problem facing retailers' bottom lines. They're also a problem for our planet.

Customers Want Returns to Be Environmentally Friendly, Too

While customers have become accustomed to fast, free, and frictionless returns, they’re also open to more environmentally-friendly alternatives: 71% of US shoppers would return an online purchase to a store, rather than through the mail, if it were shown to reduce carbon footprint! And 64% would be interested in returning items to a central depot in a shopping center as a more sustainable option. This shows with the right education and availability of sustainable options, customers are ready to do their part to minimize their footprint when it comes to returns. But, what can retailers do?

Taking the Intelligent Route Forward

Most retailers deal with returns by simply managing them. But why treat the symptom when you can address the root cause and resolve it before the return ever happens? As it turns out, up to 73% of returns could be prevented with retailer intervention—if they had insight into the root cause. To get to this insight requires a powerful analytics engine that can consolidate and analyze data from retailers’ POS, CRM, and customer feedback systems to transform it into actionable intelligence.

Using returns intelligence to predict returns—and take action to prevent them before they escalate out of control—presents a meaningful opportunity for retailers to minimize their environmental footprint while also protecting revenue. As a natural output of reducing returns, you're reducing waste as well as the carbon footprint of shuttling product back and forth. And to add icing on the cake, early insight into returns can be used to optimize assortment planning and inventory positioning, enabling retailers to reduce over-purchasing products that customers will ultimately return. 

Newmine's Chief Returns Officer offers returns intelligence to deliver key insights to predict, prevent, and understand the root causes of returns. Armed with detailed data, retailers can drill down into the returns performance of every SKU, category, and customer to uncover opportunities for growth and to recover revenue and delight customers, all while materially minimizing environmental footprint.

What’s Good for Our Planet is Good For Your Profits

The clock is ticking for the retail industry to make sustainability a strategic priority. New York recently enacted The Fashion Act, which requires global apparel and footwear companies with over $100 million in revenue to map their supply chain (and reverse supply chain), disclose actual and potential negative environmental impact, and provide impact reduction targets. It’s only a matter of time before other industries and localities follow suit. Returns Intelligence empowers retailers to protect both the environment and their bottom lines, delivering actionable insights to not just manage returns but prevent them. Tackle sustainability and profitability with Newmine's Chief Returns Officer.