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VOL. 132 | NO. 2 | Tuesday, January 3, 2017

Record E-Commerce Sales Lead to More Return Shipments

By Patrick Lantrip

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As holiday e-commerce sales continue to reach all-time highs, so does an inevitable byproduct – return shipments – bringing more business to shipping giants such as FedEx and UPS once January rolls around.

With a record number of people shopping online in November and December comes a record in returned merchandise. Returns cost retailers an estimated $260 billion, the National Retail Federation reports.  

(AP Photo/Mark Lennihan)

According to a National Retail Federation consumer survey conducted in December, 56.5 percent of people said they planned to shop online, up 6.8 percent from 2015 and the highest percentage on record.

But with a record number of shoppers in November and December comes a record number of returns in January.

UPS alone expects to receive more than 5.8 million return packages during the first week of January, with more than 1.3 million of them expected on Thursday, Jan. 5 – a day that the shipping company has dubbed “National Returns Day.”

These numbers are up from last year, when UPS received 5 million packages during the first week of January, including more than 1 million packages on National Returns Day.

“While returns can’t be eliminated, an easy-to-use returns experience should be one of several retail strategies to enhance customer loyalty and manage the cost of returns processing,” UPS chief marketing officer Teresa Finley said in a statement.

According to the National Retail Federation, merchandise returns cost U.S. retailers more than $260 billion in lost sales.

Back in Memphis, FedEx is also bracing for the post-holiday influx of returns.

“Last year, holiday shopping sales hit approximately $70 billion. However, an estimated $20 billion of those sales were returned,” said Jonathan Lyons, senior communications specialist at FedEx. “In addition, e-commerce has an increasingly higher return rate, ranging from 15 percent to as much as 30 percent of products bought online.”

While they did not specifically mention returns, FedEx executives discussed the rise of holiday shopping and the challenges of adapting to an ever-changing e-commerce environment during the company’s quarterly earnings call in December.

“The rapid rise in e-commerce continues to drive the need for alternative delivery options,” Michael Glenn, FedEx executive vice president of market development and corporate communications, said during the earnings call. “FedEx understands that the ways people work and connect are forever changing.”

The National Retail Federation reports that merchandise returns cost U.S. retailers more than $260 billion in lost sales. To stay ahead of the curve when it comes to holiday shipping and returned products, both FedEx and UPS already have taken measures by either acquiring or forming alliances with companies that specialize in reverse logistics.

In 2015, FedEx acquired Genco, a Pittsburg-based third-party logistics company specializing in product lifecycle and reverse logistics.

Lyons said that Genco works alongside businesses to help ensure they successfully manage the uptick in returned product by working one on one with retailers to implement the best individual returns process to help them maximize profitability.

UPS, meanwhile, formed a strategic alliance with Optoro, a technology company that helps retailers and manufacturers manage, process and sell returned and excess inventory.

“As e-commerce grows, returns will become an increasingly glaring challenge for retailers,” Alan Gershenhorn, UPS chief commercial officer said during a Dec. 21 announcement. “Through this UPS Strategic Enterprise Fund investment, we are expanding our returns solutions supported by one of the fastest-growing companies disrupting the reverse logistics process.”

The Associated Press contributed to this article.

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