In my previous column, I highlighted some of the ways my team of buyers prepares to head into tradeshow season. Purchasing new items or categories takes equal parts methodology and instinct coupled with research and chance – it’s a science combined with customer knowledge. I’m happy to report that tradeshow season is in full swing, and the team is actively looking for the next big thing to hit the shelves.
In March, I attended one of the largest hardlines (consumer durables) trade shows in the world, the National Hardware Show (NHS) in Las Vegas, Nevada and rather than focus on products, I concentrated on learning. The first annual Executive Summit at NHS was a series of five educational sessions led by experts in such fields as customer trends, merchandising and remodeling. Big names like E&Y, Houzz and Home Depot sent leaders to dissect research happening around the globe and make it accessible to the independent channel. It was a wealth of data and learnings that as a small business owner, I wouldn’t have otherwise had access to. I also presented at the summit. I shared the stage with Dan Tratensek, COO and Publisher, North American Hardware and Paint Association and Jodi Karroum, Director of Business Development, Walmart – Hardlines. We provided insight into how retailers are adapting to industry changes around staffing trends, e-Commerce, and succession planning. A key take-away from this panel is that these concepts don’t just affect the big guys. The more we talk about and share best practices, the better we can get.
Speaking of which, the session that I found most thought provoking was the last one of the morning. It was led by Erik Caldwell, Vice President Supply Chain Operations, Home Depot and Tony Sciarrotta, Executive Director, The Reverse Logistics Association (RLA).
The RLA offers information, research, and solutions for manufacturers, retail companies, and third-party providers with a goal to provide education and inform reverse logistics professionals globally and be the voice of the reverse industry.
I have to be honest; I had never heard the phrase “reverse industry.” Simply put, it’s a very large industry that has been built up around returns – billions of dollars of goods that are returned to retailers every year. Everything impacting global giants like Home Depot, absolutely affects us smaller ones too so I paid close attention. The process is not new, consumers have been buying and returning goods for as long as businesses have operated, and returns started growing with the advent of catalog and phone orders. Fast forward many decades and e-Commerce has blown the numbers out of the water.
The Numbers
According to the National Retail Federation, the total value of merchandise returned by consumers in the United States in 2023 was a staggering $743 billion. The data is broken down to include in-store and online returns.
- Total Return Rate: As a percentage of sales, the overall return rate for 2023 stood at 14.5%. https://nrf.com/media-center/press-releases/nrf-and-appriss-retail
- Online Returns: Online sales experienced a higher return rate, with 17.6% of merchandise purchased online being returned. This amounted to a whopping $247 billion in online returns. (NRF | NRF and Appriss Retail Report: $743 Billion in Merchandise Returned in 2023)
I want to share some of the highlights that I gleaned from this session.
Las Vegas in March 2024
The Challenges
As e-Commerce grows, so does the need to figure out what to do with everything that is sent back. This challenge can be further broken down into several categories with the primary concerns being both operationally and environmentally focused.
- Not everything is able to return to the shelves – items that are damaged or have an electrical component cannot be placed right back on their original shelf; requiring costly repairs, a downstream (i.e., discount) market and replaced packaging.
- An incredible amount of packaging is required. Cardboard, packing material and all sorts of plastics are used to box up and ship items. Once compromised, much of that material cannot be used again. Customers return items in various states of “good packaging,” often using unusable material too. This costs retailers more and leaves a tremendous amount of waste to dispose of.
- Landfills shouldn’t be the (only) answer. Many industries ship their excess inventory and returned goods to overseas landfills, making the trash problem, someone else’s problem. Not only is this extremely detrimental to the environment, but it’s also not sustainable as a long-term solution. There aren’t currently enough regulations that govern this type of practice.
Legislation in the U.S. could help guide the future of this growing challenge.
- There are currently few Federal guidelines for dealing with returns so states have created their own regulation retailers must abide by. This is a disjointed process whereby even neighbouring states might have differing requirements – very strict or very lenient – leaving corporations to understand and follow too many unrelated laws.
- Europe leads the way in regulatory advancements for reverse logistics and those guidelines could eventually make their way to the U. S. The RLA has a team monitoring what is being done globally to impact the reverse logistics landscape, knowing that the U.S. does not currently have the most rigorous or comprehensive laws.
What’s happening in Europe?
Efforts like the Circular Economy Action Plan, part of the European Green Deal and the EU’s Waste Framework Directive are intended to address the reverse logistics challenges. These are not unique to the U.S. Circular economy action plan – European Commission (europa.eu).
In the UK, similar initiatives are underway, with the government consulting on introducing an Extended Producer Responsibility (EPR) scheme. This would hold producers accountable for the lifecycle of their products, including when they become waste.
This approach aims to incentivise retailers to design products with longer life spans and to facilitate easier repair and recycling. https://www.swiftpak.co.uk/insights/what-is-extended-producer-responsibility-uk-updated-2023
The American Retailer Response
Home Depot was served up as a case study for what is being done well in the reverse logistics field while acknowledging that there is still much more to do. Caldwell shared three major efforts underway.
