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Jan 16,2017

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Online shopping drives surge in holiday returns, andwhat happens next may surprise youThe good news? You can return pretty much anything you buy online.The bad news? It’s costing retailers big money and may not besustainable.

OurWindsor.CaBy Francine Kopun

It’s the place where unwanted Christmas gifts go to start a new life on the resale market.

The Feisty Ferret Home cage that didn’t quite work out as planned; the Star Wars mask; the JimmyChoo shoes that maybe you actually wore on New Year’s Eve; dozens and dozens of television sets,returned for all kinds of reasons, end up in the new year on the floor of warehouses such as theone in Brampton operated by Liquidity Services.

“This Christmas returns season is our peak, from now to the first week in March,” said John Lee,vice-president and general manager, Canada, for Liquidity Services, a global companyheadquartered in Washington, D.C.

The returns business is booming, thanks to an increase in shopping online, where return rates arehigher than at bricks-and-mortar retailers, according to Lee.

Figures from the Retail Council of Canada, the National Retail Federation in the U.S. and card-payment processing company Moneris peg regular retail returns at about 8 per cent to 10 per cent

Home News Business Online shopping drives surge in holidayreturns,...

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ReturnsBernard Weil/Toronto StarThe returns business is booming thanks to an increase in online shopping, says John Lee, vice-president andgeneral manager, Canada, for Liquidity Services, a global company headquartered in Washington, D.C.

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of sales, or about $26.6 billion in Canada in 2015.

Online returns are closer to 20 per cent, surging to 30 per cent during the holiday gift-givingseason, as good intentions give way to panic and last-minute delusions about how happy yourloved ones will be to find a trout tie or electric bug vacuum under the tree meet with grim reality.

The goods at Liquidity Services and similar companies, which collect returns from major retailersthey’re not allowed to publicize, will be bought by resellers and end up in neighbourhood stores, atflea markets, on Kijiji and Craigslist, even on Amazon, where many of them were purchased in thefirst place.

Potential buyers check out product on display at Liquidity Services in Brampton, where literally tonsof returned items end up for resale. (Bernard Weil/Toronto Star)

The bad news for shoppers is that liberal return policies in effect today are costing retailers bigmoney and may not be sustainable.

“Retailers are concerned, absolutely,” said Diane Brisebois, president and chief executive officer ofthe Retail Council of Canada.

“Eventually, I am guessing, someone will blink and say: ‘We just can’t ship and accept returns forfree 24-7 all the time. It is not sustainable.’ ”

There are many reasons online returns are higher; the most obvious is that it remains difficult tojudge a product without seeing it in person.

Some online shoppers order an item in different colours and sizes, knowing ahead that they will bereturning all but one of them.

There’s a learning curve when it comes to online shopping, Brisebois points out; once people figureout what products work for them, they’re less likely to return items.

As the online shopping experience continues to improve thanks to technologies such as 3D andvirtual reality, returns will decline, Brisebois believes.

Failure to stem the increase in returns could result in higher prices to consumers.

“It will take a couple of years, we believe, for this to settle and for return policies to adjust in orderto make sure they are servicing customers and avoiding abuses because, at the end of the day.Let’s not fool ourselves, it’s the customer who pays,” said Brisebois.

Different retailers have different policies when it comes to restocking returned items, Lee said.

For some retailers, as long as a product is “reasonably retail-ready” (an industry term), it goesback on the shelves.

Other retailers won’t return an item to the shelves if the packaging is so much as wrinkled.

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Items that have been returned get sorted at Liquidity Services, for resale later. (BernardWeil/Toronto Star)

Returned items follow different journeys. Some are returned directly to stores. Some retailersdirect returns to their distribution centres.

Liquidity Services buys the returned items from the retailers.

Other retailers arrange to have customer returns sent directly to Liquidity Services, which, for a feepaid by the retailer, processes the credit card refunds and arranges to liquidate the products.

Returned merchandise used to end up in landfill, said Lee.

But the idea of an ocean of returned items continuing to wash through the retail system, beingunboxed, re-boxed, resold, unboxed and sold again — possibly even shipped by mail again andreturned again — doesn’t seem all that environmentally friendly.

That’s actually not the biggest problem, said Emily Alfred, waste campaigner with TorontoEnvironmental Alliance.

“Once you get into the shipping and retailing stage, it’s just a tiny, tiny fraction of theenvironmental impact of a product,” she said.

“It’s usually making the thing in the first place that is the problem.”

An e-commerce study by Antony Karabus of HRC Advisory released last year found that operatingearnings as a percentage of sales declined by as much as 25 per cent due to both a shift from in-store to online sales and the investments required to support e-commerce.

The study analyzed the financial data for 37 retailers across three sectors, including departmentstores and luxury chains, specialty apparel and beauty stores and discount retailers.

Karabus said that retailers may need to tighten return policies so that returned items can still besold in season at full price, not at reduced prices or at liquidation prices because the items areused, worn or damaged.

For now, businesses such as Liquidation Services, and the people who buy from them, will continueto ring up sales.

“It was a good Christmas,” said Nathalie Collins, one of the buyers at Liquidity Services warehouse.

Collins resells what she buys on Amazon.

“I foresee a lot more volume for next year.”

Toronto Star

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