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Retailers face rising holiday-return costs, a new CBRE-Optoro report says

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Retailers are not entitled to free returns.

According to logistic forecasts, this holiday season will see an increase in the costs of processing returns, particularly against a background of rising inflation and labor shortages.

For retailers, the average holiday return cost will be around $2,500 two-thirds of the original priceThe item was calculated when labor, transport, and warehousing cost are taken into account. This data came from CBRE, a commercial real estate firm, and Optoro, a return technology company.

CNBC received an early look at the annual CBRE-Optoro report, which indicates a 7% increase in the cost of returns, also called reverse logistics — with electronics like computers, tablets and mobile devices having return costs as much as 15 times higher than clothing, because workers must remove personal data.

Tobin Moore (founder and CEO at Optoro), stated that security is increasing as more devices are connected or wired to the internet. “All watches are equipped with sensors. There are sensors on clothing and shoes. This is something that I expect to continue growing.”

National Retail Federation estimatesOnline sales will increase by 13%, to over $222 billion in November and December. The CBRE report projects that $66.7 billion of those online sales will become returns — also up 13% year-over-year and nearly 46% higher than the previous five-year average. CBRE reports that 30% to 30% of all e-commerce transactions are returned, while 10% to brick-and-mortar purchases is the average.

Retailers with major stores like Walmart, TargetAnd Best BuyTo make these sales, they are now facing rising logistics costs. CBRE has estimated that the logistics costs for large retailers operating e-commerce are now 12% of total sales, as opposed to 6% for traditional retailers.

John Morris from CBRE Americas was the head of Industrial and Logistics. He said CNBC that earlier shopping because supply chain issues has led to customers returning to their stores sooner. Scale packaging isn’t possible. Scale movement is not possible. There isn’t freight consolidation. “All of those things go backwards through supply chains, one at time,” he stated.

The CBRE report shows that logistics workers are now earning 5% more and retailers will need to have 20% more warehouse space for processing returns. Morris stated that it is further margin compression for businesses with margin problems. Morris said, “I believe that you’ll find new models in which customers have the opportunity to donate items or be given incentives to go back to the shop.” It’s because the margins are already being impacted.”

CBRE and Optoro stated that return packaging continues to pose a problem for the environment because it requires greater transportation and packaging. We estimate that after the holiday season, 5.8 billion tonnes of returned packaging will be disposed off in landfills. Morris stated that the holiday season’s returns will generate approximately 16 million tonnes of carbon dioxide.

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