Analyst Insight: The goTRG & SupplyChainBrain Retail Returns Sustainability Report 2024 presents insights from our co-branded survey exploring the evolving landscape of sustainable practices within the retail industry. With participation from 250 retailers and brands across the U.S., this report emphasizes how important it is for retailers to actively invest in sustainable returns management and environmentally responsible reverse supply chain practices.  

Returns have a major impact on both the financial viability and sustainability of the retail industry. Beyond significant revenue loss, returned items in the United States generate 16 million metric tons of carbon emissions during their reverse journey, and 9.5 billion pounds of landfill waste each year, contributing to a massive burden on the environment. Furthermore, the manner in which businesses handle returns, along with their commitment to environmental stewardship, directly influences customer loyalty and brand reputation, further underscoring the importance of sustainable returns management practices.

While challenges persist, companies are actively seeking innovative solutions and aligning their strategies with consumer expectations and environmental accountability. 

Shifting Perspectives for Sustainable Returns

Retailers and customers alike are increasingly prioritizing environmental responsibility, emphasizing a shared dedication to sustainability in returns. A noteworthy 68.4% of respondents affirmed the pivotal role of sustainability within their companies' returns process, underscoring its significance as a core value of their business model. A substantial 56.4% of respondents recognize that sustainability is an important factor for their customers, indicating a keen awareness of shifting consumer preferences towards eco-conscious brands. 

Our data also unveils a 9% increase in “buy online, return in store” (BORIS) returns over the past year, indicating that shoppers are making a concerted effort to minimize their carbon footprint from shipping to make returns more sustainable. 

This shift towards more sustainable returns behavior is further underscored by the decreasing prevalence of retailers charging fees for online returns. In 2023, 66.4% of retailers reported charging such fees, whereas in 2024, this figure dropped significantly by 21.2%. The new finding that only 45.2% of retailers charge fees for e-commerce returns suggests that many brands have found success in leveraging BORIS incentives to motivate more environmentally friendly in-store returns vs. shipping back returns, which generates unnecessary transport, resulting in the release of ecologically damaging CO2 emissions.

Investment in Sustainability Drives More Efficiency and Profitability

The number of times returns are handled during their reverse lifecycle has environmental consequences. Each touchpoint in the returns journey consumes energy and resources, contributing to the carbon footprint associated with the returns process. More touches also increase the likelihood of items getting damaged or deteriorating in value, potentially rendering them unsellable and leading to further waste. Minimizing the number of touches is critical for reducing energy consumption, resource usage and waste associated with returns.

Our survey found that most retailers, representing 50.4% of respondents, currently report touching their returns three to five times before reaching their final disposition. This marks a significant change from the previous year, where the majority of retailers (53.6%) reported touching returns more than six times. The substantial shift towards more efficient handling of returns is evident with this year's data, highlighting a marked improvement. By minimizing the number of touches, retailers are reducing their environmental impact and enhancing operational efficiency while mitigating costs associated with returns management.

Our data further indicates that retailers are investing more in enhancing their reverse supply chain and returns processes. Over the past year, a significant percentage of respondents reported making investments in sustainable reverse supply chain enhancements, increasing from 71.8% in March 2023 to 72.8% in March 2024. The majority of respondents reported allocating budgets of $1-5 million for returns management, indicating a commitment to sustainability initiatives despite potential cost implications.

Consumer Sentiments Towards Participating in the Circular Economy

Consumer attitudes towards participating in the circular economy reveal a notable trend towards embracing more sustainable shopping behavior. Almost half of respondents (49.2%) reported observing a significant increase in positive sentiment towards purchasing second-hand or used items compared to previous years, while an additional 31% noted a moderate increase. This shift indicates a growing acceptance of pre-owned goods, reflecting a changing mindset among consumers.

Similarly, perceptions surrounding refurbished products are evolving. While 33.6% still believe there is a lingering stigma, nearly half (48%) acknowledge that any existing stigma is diminishing, as buying refurbished becomes increasingly accepted and normalized. 

These findings underscore a promising shift in consumer attitudes towards sustainable consumption practices, signaling a growing awareness and acceptance of the circular economy model. As consumers continue to embrace purchasing second-hand and refurbished goods, retailers have a prime opportunity to leverage this trend by integrating refurbishment and re-commerce strategies into their returns management. This not only aligns with consumer preferences but also contributes to a more sustainable and environmentally conscious future.

Transparency Regarding Sustainable Returns Practices

A retailer’s level of transparency in sustainable returns practices is perceived to be an important factor with customers. When asked about their company's transparency regarding sustainability practices, over half of respondents (53.2%) reported being very transparent, while nearly a third (29.2%) claimed to be moderately transparent. This indicates that a significant number of companies are actively communicating their sustainability efforts, fostering trust and accountability with their customers.

There is a clear demand from customers for this increased transparency. A notable percentage of respondents revealed that their customers frequently (26.4%) or occasionally (33.2%) demanded more transparency about their company's sustainability efforts. 

This underscores the growing importance consumers place on knowing the environmental impact of their purchases and the ethical practices of the companies they support. Transparency clearly plays a significant role in building consumer trust and loyalty.

Exploring Challenges and Benefits of Sustainable Retail Returns Management

Both challenges and benefits exist that are associated with adopting sustainable returns management practices. Key obstacles associated with sustainable integrations are associated with cost implications, with 34.4% of respondents citing costs as a significant hurdle. Following closely behind was the lack of consumer awareness, identified by 27.6% of respondents, indicating the importance of education and outreach efforts. Limited technology infrastructure and regulatory hurdles were also recognized as barriers, with 20% and 14.8% of respondents mentioning them, respectively.

Despite these challenges, there is a prevailing belief in the positive impact on a company's bottom line of implementing sustainable practices in the returns process. Nearly half of the respondents (44%) strongly believe in this positive correlation, while an additional 36% hold this belief, underlining the perceived benefits of sustainability initiatives.

These findings give some sense of the complex interplay between challenges, benefits, and investments in integrating sustainability into the returns process. As retailers navigate these dynamics, strategic approaches that prioritize both environmental responsibility and financial viability will be crucial for driving long-term success in the retail sector.

Conclusion

This new data serves as a compelling testament to the growing environmental consciousness resonating within the retail sector. As retailers and consumers increasingly prioritize sustainability in their returns processes, we are witnessing a rising demand for the surrounding ecosystem of returns management and reverse logistics service providers. This emerging industry holds abundant opportunities for business growth, creating jobs, and contributing to environmental preservation. Thus, this convergence of values not only fosters a more sustainable business ecosystem but also cultivates enduring relationships founded on shared values and mutual respect.

The comparison between March 2023 and March 2024 reveals a notable improvement in how retailers perceive the impact of retail returns on their businesses. In March 2023, 16.6% of respondents categorized retail returns as a severe problem, whereas in March 2024, this figure decreased to 10.4%. This reduction indicates a positive trend towards mitigating the severity of the problem over the past year through intentional investments into retailers’ returns processes. Concurrently, there was also a decrease in the proportion of respondents who viewed returns as a significant problem, dropping from 24.4% to 14.8%. This simultaneous shift suggests a gradual improvement in managing the challenges associated with retail returns, reflecting the overall investments in returns management strategies and processes implemented by retailers during this period. 

Overall, these findings suggest a positive trajectory towards addressing and minimizing the impact of retail returns on businesses’ bottom line and the environment.

Additionally, regarding the allocation of resources, there has been consistency in the commitment to sustainability, with the number of respondents allocating budgets of $1-5 million increasing from 44.01% in March 2023 to 41.2% in March 2024. Moreover, the proportion of respondents investing in sustainable reverse supply chain enhancements remained high, with 72.8% reporting investments in March 2024. These investments are indicative of a strategic focus on sustainability initiatives, reinforcing the message that investment in returns management and reverse logistics service providers is driving retail businesses towards greater sustainability, profitability, and efficiency.