The COVID-19 pandemic created an unprecedented spike in online shopping as people, stuck indoors, needed to minimize their outside exposure while also engaging in retail therapy or preparing for new home or craft projects. Everything from necessities to toys to precious rolls of toilet paper was ordered through online retailers and delivered straight to our doors. By now, consumers have returned a record number of goods this buying season, putting additional strain on the global retail supply chain already dealing with Covid-related disruptions and driving the price of doing business to new heights.

Record Returns

In 2021 alone, 8% of all purchases made in the U.S. were returned, as much as $260 billion worth of merchandise. Under normal circumstances, retailers can forfeit 10% of sales due to returns during the peak shopping season, and 80% of shoppers are deterred from shopping at a retailer with inconvenient return policies. These figures show at once how vital a forgiving return policy is to retaining customers, even as returns themselves are a detriment to sales. And all this is without considering that the spike in returns since the pandemic began has further strained the retail infrastructure in a time of unprecedented shipping delays.

Over the last holiday season, an estimated 17.8% of the record high $886.7 in retail sales were returned, up from 13.3% and higher than originally estimated. The loss in sales is a problem, but what happens when you take an already overtaxed shipping industry, dealing with worldwide delays and scarcities, and task it with not just delivering purchases but also the large volume of returns? The resulting strain on the shipping industry is profound, vastly increasing the demand for vehicles and space, plus adding to the time burden on delivery companies already rushing to keep up. All these returns effectively cost not only the price of the returned item and its shipping, but the compounded losses of late deliveries in a very busy time.

Labor Management

Automation can mitigate shipping issues on the road. Improved automated sorting alongside drone-and-robot-based return pickup systems could help keep costs low and bring items in faster without clogging up return centers or taking up package carrier time. The problem with these initiatives is the technology is still in development and not 100% reliable, and the necessary hardware overhauls are prohibitively expensive to all but the biggest shipping giants. When it comes to the logistics of moving returns from the customer back to the storefront, our best solution currently is to iron out the problems that have led to the worldwide shipping crisis.

Since tackling a global series of delays brought on by a horrible pandemic is outside the scope of most e-commerce vendors, business leaders may want to turn to more immediate solutions. The high volume of returns is also a huge problem in warehouses, creating a logistical nightmare to store and house the returned items quickly and carefully enough to recoup any of the profit of the sale. As it is, less than 50% of all returned goods are re-sold at full price (and keep in mind that’s full price less the cost of the return). Warehouses must maximize efficiency to keep up with this intense demand, yet the current model of managing a warehouse operation by headcount is inherently cumbersome.

Currently, most warehouses require a simple, minimum headcount when assigning staff, when headcount does not necessarily equate to output. Rather than focusing on how many individuals are at work in a building, an output-based staffing model measures the number of tasks, including returns, individuals can reasonably complete. Staff are assigned based on their productivity and results, creating a more reliable daily output. By calibrating labor this way, fluctuating headcount does not lead to fluctuating costs, making warehouses both streamlined and predictable plus reducing the amount of chaos in a period when the location may be overloaded with work. So long as such a system is equitable to staff and does not overtax productive individuals or leave underperformers by the wayside without training, a results-based staffing system is ideal for processing a large volume of tasks.

It may also be worth striving to improve the rate at which returned items are resold at or near the full price. Brick-and-mortar outlet stores and warehouses that sell items that must be discounted could also attract bargain hunters without burdening long-distance delivery companies as items are resold near their original buyers. Better scanning and safeguarding of returns could ensure the resale value of stock.

Shipping delays are here to stay for at least a while longer. By mitigating the costs of returns with smarter warehouse staffing and a higher rate of full-cost resale, retailers can weather the deluge of returns and enjoy the bounty of online sales that is one of our few consolations in the era of Covid.

Harold Baro is senior vice president and general manager of labor management firm SIMOS Solutions.

The COVID-19 pandemic created an unprecedented spike in online shopping as people, stuck indoors, needed to minimize their outside exposure while also engaging in retail therapy or preparing for new home or craft projects. Everything from necessities to toys to precious rolls of toilet paper was ordered through online retailers and delivered straight to our doors. By now, consumers have returned a record number of goods this buying season, putting additional strain on the global retail supply chain already dealing with Covid-related disruptions and driving the price of doing business to new heights.

Record Returns

In 2021 alone, 8% of all purchases made in the U.S. were returned, as much as $260 billion worth of merchandise. Under normal circumstances, retailers can forfeit 10% of sales due to returns during the peak shopping season, and 80% of shoppers are deterred from shopping at a retailer with inconvenient return policies. These figures show at once how vital a forgiving return policy is to retaining customers, even as returns themselves are a detriment to sales. And all this is without considering that the spike in returns since the pandemic began has further strained the retail infrastructure in a time of unprecedented shipping delays.

Over the last holiday season, an estimated 17.8% of the record high $886.7 in retail sales were returned, up from 13.3% and higher than originally estimated. The loss in sales is a problem, but what happens when you take an already overtaxed shipping industry, dealing with worldwide delays and scarcities, and task it with not just delivering purchases but also the large volume of returns? The resulting strain on the shipping industry is profound, vastly increasing the demand for vehicles and space, plus adding to the time burden on delivery companies already rushing to keep up. All these returns effectively cost not only the price of the returned item and its shipping, but the compounded losses of late deliveries in a very busy time.

Labor Management

Automation can mitigate shipping issues on the road. Improved automated sorting alongside drone-and-robot-based return pickup systems could help keep costs low and bring items in faster without clogging up return centers or taking up package carrier time. The problem with these initiatives is the technology is still in development and not 100% reliable, and the necessary hardware overhauls are prohibitively expensive to all but the biggest shipping giants. When it comes to the logistics of moving returns from the customer back to the storefront, our best solution currently is to iron out the problems that have led to the worldwide shipping crisis.

Since tackling a global series of delays brought on by a horrible pandemic is outside the scope of most e-commerce vendors, business leaders may want to turn to more immediate solutions. The high volume of returns is also a huge problem in warehouses, creating a logistical nightmare to store and house the returned items quickly and carefully enough to recoup any of the profit of the sale. As it is, less than 50% of all returned goods are re-sold at full price (and keep in mind that’s full price less the cost of the return). Warehouses must maximize efficiency to keep up with this intense demand, yet the current model of managing a warehouse operation by headcount is inherently cumbersome.

Currently, most warehouses require a simple, minimum headcount when assigning staff, when headcount does not necessarily equate to output. Rather than focusing on how many individuals are at work in a building, an output-based staffing model measures the number of tasks, including returns, individuals can reasonably complete. Staff are assigned based on their productivity and results, creating a more reliable daily output. By calibrating labor this way, fluctuating headcount does not lead to fluctuating costs, making warehouses both streamlined and predictable plus reducing the amount of chaos in a period when the location may be overloaded with work. So long as such a system is equitable to staff and does not overtax productive individuals or leave underperformers by the wayside without training, a results-based staffing system is ideal for processing a large volume of tasks.

It may also be worth striving to improve the rate at which returned items are resold at or near the full price. Brick-and-mortar outlet stores and warehouses that sell items that must be discounted could also attract bargain hunters without burdening long-distance delivery companies as items are resold near their original buyers. Better scanning and safeguarding of returns could ensure the resale value of stock.

Shipping delays are here to stay for at least a while longer. By mitigating the costs of returns with smarter warehouse staffing and a higher rate of full-cost resale, retailers can weather the deluge of returns and enjoy the bounty of online sales that is one of our few consolations in the era of Covid.

Harold Baro is senior vice president and general manager of labor management firm SIMOS Solutions.