The development of Today's Online Return Cycle | ITC SHOP NOW

This article is part one of a three-part series covering the development and landscape of the online return cycle, the negative environmental and consumer impacts of the system, and how you can make smarter purchasing decisions to break the cycle.

When you return an item, do you know where it goes? More often than you’d think, it doesn’t end up back on the shelf. From discount liquidation warehouses to landfills, many returned items can no longer be sold as new products, and the current cycle isn’t sustainable for shoppers or our planet.

America’s skyrocketing return culture is far-reaching—negatively impacting the environment, the cost of products for the consumer, and the overall quality of products in the market. Around 10% of retail goods are returned annually—sometimes twice as many for online retailers—and this number is only increasing each year. Despite the growing public consciousness around sustainability, many shoppers don’t consider what happens to a product once they decide to return it.

According to the National Retail Federation, consumers returned approximately $428 billion worth of merchandise in 2020 and  $761 billion in 2021, jumping from a 10% to 16% overall return rate. Online returns have become so convenient that shoppers often don’t realize the sheer quantity of waste created by the cycle, assuming their returned items are being re-sold to other consumers and failing to consider the additional impacts of these returns—both environmentally and financially.

The psychology and behavior around returning goods hasn’t always been this way, so how did we get here? What began as a means for companies to instill confidence in their products has flipped to an inherent shift in the decision-making process in which shoppers engage for every purchase. To fully grasp the unintended consequences of this shift and learn how to break these patterns, we must explore how this system evolved.

The Development of Unsustainable Returns

The contemporary return policies that we’re familiar with were born out of a marketing tactic popularized in early-20th-century Sears mail-order catalogs. Merchants began implementing “satisfaction guarantees” to encourage customers to buy more by reducing their risk and allowing returns or “money-back guarantees.” Though return numbers remained steady for decades, by the late 1990s and early 2000s, rates began to climb rapidly.

Woman online shopping while surrounded by boxes

With the popularization of the internet, online retailers like Zappos and Amazon pushed return expectations even further by encouraging customers to order multiple styles and sizes and making returns free and easy. Many of us grew up hearing the phrase, “there’s no such thing as a free lunch,” and in the world of eCommerce, “free” returns show just how true that sentiment is.

As the online retail market becomes the preferred shopping option and more comparable offers enter the market, companies have to stay competitive with the consumer expectation for free returns and aggressive pricing. However, the extra cost a retailer incurs for a  “free” return is merely incorporated into the original consumer price of the product, and as returns increase, so does the individual price of an item.

In 2020, nearly two-thirds of shoppers purchased multiple versions of an item with the intention of returning some of them, not realizing that these behaviors drive the cost of products up over time and create compounding waste by doubling the transportation, packaging, and labor required to process and dispose of these preplanned returns. On top of the waste, companies today are frequently forced to reduce expenses in other ways to maintain the prices and conveniences that shoppers demand, and these measures create lower-quality products over time.

Furthermore, due to cost-cutting measures like inferior materials and cheap labor, manufacturers produce substandard products that only fuel the cycle of returns and waste. As consumers’ expectations for quality fail to be met, or the item doesn’t last as promised, these products are also returned, just compounding the issue. In fact, the number of lower quality products that consumers have had to replace has doubled since 2004. This means that items are continuously becoming more expensive while simultaneously less durable as manufacturers are forced to utilize low-cost labor and materials to maintain the levels they were at a few years ago.

The Return System Today

The Covid-19 pandemic has only furthered the ecosystem of returns as consumers turned to online shopping out of necessity during times of quarantine. Companies have developed new business models to manage the overwhelming quantities of miscellaneous, poorly repackaged, and damaged items that are now being returned. Many products would cost more than they’re worth to inspect, process, and repack, and legally, most electronics and technology products cannot be sold as “new” once they’ve been plugged in or opened. 

Consequently, a staggering volume of returned merchandise ends up in landfills. Even for stock that survives the processing loop, much of it is delegated to “second hand” status due to safety and legal regulations. With immense numbers of returned products coming in, many companies have turned to the practice of selling off liquidated goods in bulk to discount retailers. When applied to retail, the term liquidation refers to clearing out surplus stock for much less than the original cost, and today customer returns make up the largest category of liquidations. Despite efforts, most of the products from these liquidation warehouses end up in landfills anyway.

Returned Packages piled up by a dumpster

Though retailers may have created the expectation for free and easy returns, the relationship has essentially reversed. Consumers now lead the charge in demanding cost-free conveniences without considering the long-term consequences. And yet, the rapid rise in online returns harms not just retailers and consumers, but the environment and economy as well. From the additional transportation emissions and returned items crowding landfills to the rising prices and frequent need for consumers to replace their products, the negatives of this system far outweigh the positives.

The next installment of this series explores just how high the cost of today’s online return cycle is, covering the surge in pollution, the logistical nightmare of the reverse supply chain, and the hidden consumer costs that come from excessive returns. 

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