In the second episode of Herb’s Hot Takes on Returns, Herb Billings, vice president of technology strategy at Datascan, talks about the what happens to merchandise after the return.
“About 25 percent of all returned items are thrown away, representing five billion pounds annually in the U.S. That has an environmental impact, and it’s a waste of resources,” Billings explained.
So, why would a retailer throw away perfectly good items? According to Billings, it’s simply a matter of numbers: “When the cost to restock is greater than expected profit… they toss it.”
Another avenue for returns is donation or incineration, which covers about 10 percent. Donation is a great outcome, but why incinerate? “High-end luxury brands don’t want to donate or throw away goods because it can degrade the brand, so incinerating makes more sense,” Billings said.
So, what about the rest? Those items do make it back to the shelf in one way or another. Billings shared examples like restocking of tools or hardware at home improvement stores. He also noted that 70 percent of high-end apparel goes back for resale.
The logistics of returns do pose a high cost for retailers. For those with brick-and-mortar stores, they prefer in-store returns. For those without, many have partnerships with brands that have physical stores, like Kohl's and Amazon.
The last possible channel for returns is liquidation. “Amazon has its warehouse. Walmart sells returned electronics online. There are also smaller resellers that take these returns and sell them on eBay or Amazon Marketplace,” Billings added.
