By Joshua Burd
The e-commerce explosion has fueled a surge in online returns — especially during the holiday season — driving additional demand for industrial space in New Jersey and nationally.
That’s according to new research from CBRE, which projected that consumers in the U.S. and Canada would make up to $37 billion worth of returns from their 2018 e-commerce holiday purchases. The firm said the need to process and resell those items, often called reverse logistics, creates a challenge for sellers, but also an opportunity for landlords who lease space to retailers and third-party logistics firms.
“Reverse logistics as its own sub-specialty has created additional demand in the already over heated New Jersey industrial (and) logistics real estate market,” said William Waxman, an executive vice president in CBRE’s Saddle Brook office. “This trend will continue to grow as this sector matures and expands over the next few years.
“The reverse logistics phenomenon should also help to act as a buffer in any coming recession.”
The real estate services firm teamed with Optoro, a technology company that optimizes returns for retailers and brands, for its latest annual report on reverse logistics. CBRE noted that the traditional return rate for goods purchased in stores is roughly 8 percent, while the rate for online purchases ranges from 15 percent to 30 percent, depending on the merchandise category.
With eMarketer projecting $123 billion of online sales during the 2018 holiday season, the estimated $37 billion in online returns was up from the prior year’s forecast of $32 billion, CBRE said. That means the need for real estate solutions is only growing.
Companies that opt to handle online returns within their own supply chain often need to add warehouse space to do so, the report said, given that processing returns is labor- and space-intensive. Optoro calculates that reverse logistics can require, on average, 15 percent to 20 percent more square footage than the typical outbound supply chain.
CBRE highlighted another popular option — hiring a third-party-logistics firm to handle returns — noting that 3PLs accounted for more than half of the 50 largest U.S. warehouse leases in the first half of 2018. Nationally, 3PLs have expanded their real estate footprint by 3 percent to 5 percent annually.
Both options are critical for retailers during the holiday season and throughout the year, CBRE said, citing the importance of speed and efficiency when it comes to processing returns and putting the products back on the market. For instance, consumer electronics that are returned can lose 4 percent to 8 percent of their value for each month they’re not resold.
Meantime, fashion apparel can lose 40 percent to 50 percent of its value over an eight- to 16-week span after being returned, according to Optoro.
“With ecommerce sales and returns, on the rise, retailers and brands need systems in place to route inventory quickly and efficiently,” said Joe Hsu, senior director of solutions at Optoro. “Using a returns optimization platform can help retailers, recoup costs, get inventory back to stock and available for sale faster, and improve the customer experience through faster refunds.”
