HOUSTON – (Realty News Report) – America’s warehouses are feeling the aftereffects of the e-commerce surge. According to a new CBRE report, January 2 is projected to be the peak day for holiday returns, with an estimated 1.9 million packages being shipped back from customers to retailers on that single day.
These returns create a significant demand for warehouse space. Handling returned items—such as unwanted or failed holiday gifts—requires 15 to 20 percent more space than outbound logistics in a traditional supply chain, according to a CBRE study produced with Optoro, a technology firm that helps retailers optimize returns.
Online holiday sales for the season were forecast at $138.5 billion for 2019, a 13.5% increase from 2018, and roughly $42 billion of those purchases are expected to be returned, the report states.
When processing returns, operators often prefer older, second-generation industrial space over modern Class A facilities. Lower ceiling heights are better suited to returns operations because these activities are high-touch, slower, and often involve irregular pallet configurations that are difficult to stack safely in tall racking systems, the report explains.
Because returned goods typically depreciate quickly in value, there is urgency in processing them—a workflow the report refers to as reverse logistics.
“Returned merchandise has a massive impact on retailers’ bottom lines, so the industry is keenly focused on developing new ways to reduce returns and better process those that do come in,” said John Morris, CBRE Executive Managing Director and Americas Industrial & Logistics Leader.
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Different product categories lose value at different rates after being returned. For instance, fashion apparel can decline 20 to 50 percent in value within eight to 16 weeks, per Optoro. Electronics typically depreciate 4 to 8 percent per month.
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Facilities dedicated to reverse logistics require 15 to 20 percent more space than traditional outbound distribution centers because returned items vary widely in volume, dimensions and ultimate disposition.
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Common options for handling returns include restocking items for sale in stores, selling to discounters or resellers, donating goods to charities, or destroying them. According to Optoro, returns contribute roughly 5 billion pounds of waste to U.S. landfills each year.
Jan. 2, 2020 Realty News Report Copyright 2020
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