In an unassuming town outside Allentown, Pennsylvania, a desk is the stage for Jean Fargas Maldonado, an unsung hero in the vast world of retail returns. Carefully unwrapping a turtleneck sweater, she scrutinizes every detail before determining its fate in the complex web of returned merchandise. Welcome to the realm of reverse logistics, where the aftermath of sales gone awry is meticulously managed by companies like Inmar Intelligence.
The retail sector, a cornerstone of the economy with an estimated $5 trillion in annual sales, faces a formidable challenge—returns. Last year, American shoppers returned a staggering 16.5% of their purchases, valued at nearly $817 billion, double the percentage from 2019, according to the National Retail Federation. As the holiday season concludes, retailers brace themselves for the aftermath, grappling with the financial implications of a returns hangover.
For Inmar Intelligence and its 300,000-square-foot warehouse, reverse logistics is a daily battleground. Located in an Eastern Pennsylvania region teeming with distribution centers, the facility processes up to 950,000 goods weekly from a diverse range of companies, including fashion retailers, home-goods merchants, department-store chains, and retail pharmacies.
The task at hand for workers like Maldonado is to meticulously inspect each item, deciding what is fit to return to shelves and what will find a new home through donation, liquidation, or, unfortunately, the landfill. Even seemingly pristine items require close scrutiny, with workers armed with lint rollers and scissors, occasionally resorting to a sniff test to ensure freshness.
Inmar’s executives reveal the peculiar discoveries within returned items—forgotten belongings, kitchen knives, and even wedding rings left in pockets. Thomas Borders, Inmar’s General Manager of Supply-Chain Solutions, humorously notes that undergarments are the number-one unintentional return with pants.
Returns, a growing headache over the past four years, intensified during the pandemic as consumers shifted to online shopping. The convenience of ordering multiple sizes and colors to try on at home fueled a surge in returns, disrupting the once-predictable flow of goods.
The aftermath of returns, however, is far from straightforward. Inmar estimates that handling a return for a $100 online order costs merchants around $27, factoring in shipping, warehousing, and labor costs. Retail analyst Tom Enright suggests that companies lose about 50% of their margin on returns when accounting for initial sales and return processing costs.
The fate of returned items varies; approximately 30% are resold, while the rest face donation or liquidation. Retailers, traditionally absorbing return costs to attract customers, are beginning to reassess their policies. Fast-fashion giants like H&M and Zara now charge customers for return shipping, Old Navy provides online fitting tools, and Amazon alerts shoppers about frequently returned items.
Companies like Inmar play a pivotal role in managing the influx of returns and navigating the complexities of diverse return policies. The decision on whether an item returns to shelves or meets its end in a landfill hinges on its value, according to Borders.
In a world where efficiency is paramount, processing returns lacks the streamlined nature of order fulfillment. Workers painstakingly inspect an eclectic mix of goods, ranging from clear jars of hair gel to coffee machines. Despite the challenges, Inmar emphasizes that less than 1% of the returned goods it handles annually end up in landfills.
As the holiday season comes to an end, the unseen heroes of reverse logistics continue their work, ensuring that the aftermath of returns doesn’t overshadow the joy of the initial purchase. The dance between customers, retailers, and return processors is a delicate one, with each step revealing the complexities of a retail ecosystem striving for balance.
Source: Wall Street Journal
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