What Happens to Our Online Returns
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Brian Lehrer: It's the Brian Lehrer Show on WNYC. Good morning again, everyone. Now a peek inside the world of reverse logistics. David Owen of the New Yorker asks, in a recent story, what happens to all the stuff we return? David's reporting delves into the growing problem of returns, especially from all the online shopping people have been doing since the start of COVID and the challenges they pose for retailers. "Most online shoppers," David writes, "assume that items they return go back into regular inventory to be sold again at full price. That rarely happens."
Consider, for a moment, that for some online apparel, retailers, returns make up about 40% of sales, they say. Obviously, this isn't just a problem for retailers. There are environmental impacts and ethical considerations about waste and sustainability too. David Owen joins us now, staff writer at the New Yorker. Again, his article is called What Happens to All the Stuff We Return. Hi, David. Thanks for coming on WNYC today.
David Owen: Hey, Brian.
Brian Lehrer: Let me start here. As part of your reporting, you attended a conference in, where else, Las Vegas, conducted by the Reverse Logistics Association, which you described as a trade group whose members deal in various ways with product returns, unsold inventories, and other capitalist jetsam. I love that word. Seeing that word in the New Yorker, "Jetsam." What did you learn when you convened with them? Take us inside the world of and maybe even define, for our listeners, reverse logistics.
David Owen: It's like the mirror image of what we've talked about a lot in recent years. There's the supply chain and then there's the reverse supply chain. The supply chain is how stuff gets from manufacturers to retailers and to us, and the reverse supply chain is how we send back stuff that we don't want. Now that much more shopping is done online, that percentage has increased. There's just stuff that I never would've imagined-- for example, that artificial Christmas trees go back after Christmas. Even the fake plastic grass goes back after Easter. The biggest period in the year for returns of big-screen television sets is right after the Super Bowl. You buy a big-screen TV, you throw a Super Bowl party, and then you take it back immediately after the Super Bowl ends.
Brian Lehrer: Wow. You're basically renting that TV or that fake Christmas tree at no rental cost if there are free returns.
David Owen: Right. Renting it for free. It's interesting that for a long time, people didn't really know what to do with all this stuff. Now it's this hotbed of entrepreneurial creativity. All the people that I met in Las Vegas were about 800 members of the Reverse Logistics Association there. They were excited because they were trying to figure out basically how to turn these returns into a business and doing it in a lot of clever ways.
Brian Lehrer: Is this an ethical challenge for the consumers because maybe people would be too embarrassed to walk back into PC Richards the day after the Super Bowl and say, "Well, I don't really need this 70-inch television anymore that I bought three days ago" or to go into Target on December 26th and return the Christmas tree.
David Owen: They're surprisingly willing to do that. Well, on the one hand, retailers are finding various ways to discourage returns by charging what they call restocking fees or charging for postage. At the same time, they're trying to make it easier. Many Target stores have drive-up refund windows. You don't even have to go inside the store. To return stuff to Amazon, you don't even have to box it yourself anymore. You can take it to a UPS store or to some other retailers, you get a QR code, you take it in, they scan it, they consolidate shipments back to either Amazon or to the people who deal with it.
It costs retailers money to accept these returns. At the same time, they don't want unhappy customers, so they try to make it easier. I think one thing that's interesting is that the two biggest retailers in the world, Amazon and Walmart, also have some of the most generous return policies. The correlation between ease of returns and profitability is, in some ways, the opposite of what you would intuitively think it is. Retailers want you to be willing to take stuff back.
Brian Lehrer: I guess in the era of online shopping where you can't try on a piece of clothing, for example, if you're buying it online, then in order to encourage you to take that risk of buying something without seeing it, they make it mostly risk-free if they're offering free returns. That stat about clothing that I cited in the intro from your article, that some online apparel retailers report that returns make up about 40% of sales. 40% of clothing purchases online get returned to some places.
David Owen: It's kind of amazing. If you're trying on something in a store and you've basically been observed while you're handling it, and someone who works in the store can pick it up in the dressing room and refold it and put it back on a shelf, but it's much harder to do with online things. There was someone who deals with returns at Amazon, who was at the conference, who I spent a fair bit of time with, and he said, "Once-- if the box is opened, if the package has been opened, they really can't sell it again as new because they don't know what's happened to it."
He said that he himself, even though he understands that as well as anybody, when he buys shoes, he'll order two pairs, half size apart. Even if the first pair he tries on fits him perfectly, he'll think, "Hmm, I wonder if the other pair fits me a tiny bit better." He'll try it on too, even though he knows that by sending it back in open condition, he's guaranteed that it won't just go right back and be sold again as new.
Brian Lehrer: Do you mean they don't inspect shoes? People try on shoes in shoe stores and people try on all kinds of clothing in clothing stores, but the online sellers assume that we did something gross in these clothes and so they won't restock them?
David Owen: I think mostly. When I was a kid, my mom would take me to a [unintelligible 00:07:09] and grumpily try on school shoes. Any that didn't fit would just go back in the box and other obnoxious 10-year-olds would try them on later. It happens very rarely in online shopping. When I asked the guy from Amazon, he talked about-- In the reverse logistics world, they talk about triage. When something comes back, they analyze its condition and the condition of the packaging, and they make decisions about what can happen to it next. I asked him, how much of triaged material just goes right back on the shelf. He said that that portion is minimal. He said it just doesn't happen very much.
Brian Lehrer: Does that mean we're creating a trash stream, when we return things as well?
David Owen: Well, we're definitely contributing to it. I think part of the goal of the reverse logistics world is to find ways to sell things down the line. Products that go back will end up being refurbished or analyzed or they'll move down one layer down in the retail world. I think I'm not alone in worrying that companies like Amazon, specifically Amazon, have put a lot of mom-and-pop-type stores out of business. At the same time, though, they've put other kinds of mom-and-pop stores into business because there are a lot of businesses that make their money by selling stuff that people have returned to other places.
I visited an interesting company in Georgia that receives and refurbishes certain kinds of items that people have returned. One of the items that I watched them refurbishing were Husqvarna pressure washers which had actually been manufactured by Briggs and Stratton under license with Husqvarna. They had been returned for one reason or another. They basically had a reverse assembly line. They were studying them, putting them back, making them work again when they could, and then relabeling them as Murray Pressure Washers, which is a brand that Briggs and Stratton owns. Then they would go for sale, not in a place like Lowe's or True Value but a discount retailer like Ollie's, someplace like that.
Brian Lehrer: My guest is David Owen, a staff writer for the New Yorker. We're talking about his article, What Happens to All the Stuff We Return? Listeners, we invite your calls here on how returns influence the way you shop. 212-433-WNYC. Are you one of those people who buys five pairs of pants with the goal of returning four, for example? You can just reflect on your experience with product returns. If you work for a retailer, you can help us report this story from that point of view, whether Amazon or a brick-and-mortar retailer. 212-433-WNYC. If you can't get through on the phone, you can text us at that number or tweet @BrianLehrer.
For some reason, we're getting our second call this morning from France. We had a Paris caller on an earlier segment. Here's Douglas in France who wants to compare, I think, US and France return policies. Hi, Douglas. Hello from New York. Thank you for calling in. Are you in that France?
Douglas: Yes, Brian. Thank you. I love your show. I listen to it every single day in France. Thank you.
Brian Lehrer: Thank you. It's a good time to start a show like three o'clock in the afternoon, right?
Douglas: Yes. I'm here at 5:25.
Brian Lehrer: Oh, there you go. You're six hours ahead. Go ahead.
Douglas: Purchasing an object is about choice-making. When we purchase an object and when we give the money to another individual and when that transaction is completed, the person has our money and we have the object, the transaction is completed. There is nothing else to say. Europe, and particularly France, believes these very strongly. I would challenge you to attempt to return something in France. It's really difficult to do, no matter what the object is. I recently tried to return a bed. It took me nine months. I finally got it returned. It was defective.
I had a business in the United States for over 30 years. My family had a multi-generational business for 118 years, and we had a policy, "No refunds, no exchanges." We educated our customers. We told them because-- I wanted to add, it was a foot care footwear facility, and the shoes were $300 to $400 per pair. We educated our clients, and we told them, "If you want the object, if you want this, buy it, and if you don't want it, don't buy it, but don't think for a second that after you buy it, that we're going to renegotiate this transaction."
Brian Lehrer: Do you think there's something about that that reflects European, if I can generalize from France, versus American ideas of consumerism?
Douglas: Absolutely. This is exactly the topic, to me, Brian. In other words, people in the United States have far too much choice and far too much freedom. It doesn't mean that-- I'm an American living in France, and I want my freedoms, of course, but a freedom is not the right to go and manipulate businesses and manipulate and manipulate. This is what's going on. You have to see that when the consumer, and I mean consumer not customer, when the consumer wants what they want, that's not healthy. It's only healthy if what they want is healthy.
Brian Lehrer: Douglas, I'm going to leave it there. Thank you so much for that cross-cultural comparison. I don't know if we have time to get into the distinction between consumer and customer, even though that's a real philosophical and cultural thing, but, Douglas, thank you so much. I happen to have a producer on my team who says they have returned at least one thing in France. That producer spends some time there, has personal ties in France, and so wonders if David's story is universally true over there. I mean Douglas' story. David, did you do any international comparisons for your story, and what do you think as you hear Douglas talk about the rules as he experiences them?
David Owen: There are definitely cultural differences. Japanese consumers, for example, hardly ever return anything. The Germans are big returners. It's different in different cultures. It's interesting that the example that Douglas gave is very similar to one of the people I interviewed who is in the business of processing returns. He did a seminar at a business school, and he was asking these MBAs, who were environmentalists and MBAs, "If I offered you a super high-quality computer that was better than the computer you have now, in every category, across the same, and the only difference would be that you would not be able to return it." He said no one in that group said yes.
I think what Douglas was talking about is exactly that same kind of thing. Here's a high-quality product, you make it possible for someone to have it, but the cost doesn't include the considerable cost of eating the returns from other people. It's tricky to do. I remember when buying shoes for my kids from L.L.Bean in the old days, in the old mail-order days, they would ask you to trace your foot on a piece of paper and include that with your mailed-in order form, and, as a result--
Brian Lehrer: That's what would determine your shoe size.
David Owen: Right. Well, you put your shoe size, but then you also had this tracing and, as a result, the shoes that came were good, it would fit. That's harder to do online. Someday, maybe you'll just put your foot on your phone, and they'll know exactly what to give you, but it's--
Brian Lehrer: I think we have a true confession call here from Zach in Crown Heights. Zach, you're on WNYC. Hello.
Zach: Hi, Brian. How are you? Happy Thursday.
Brian Lehrer: And to you.
Zach: Thank you.
Brian Lehrer: Tell us your story.
Zach: I just use Walmart as a temporary source of all kinds of things, mostly camping equipment. If I'm going camping with friends, I'll just go run it up, spend hundreds of dollars at Walmart on camping equipment because, usually, it's pretty crappy. The quality of things at Walmart is pretty crappy, so I can go to sleep just fine at night doing it. Then we use it, return it all. They're like, "What was wrong with it?" I say, "It didn't fit," or something. Been doing it for years. It's awesome.
Brian Lehrer: Camping equipment? Doesn't it come back muddy and full of bug spray and stuff like that?
Zach: Yes. Sometimes, yes.
Brian Lehrer: But they'll take it back.
Zach: But they'll take it back. They'll take pretty much anything back at Walmart. You could buy a grill at Walmart, use it, and return it covered in grease.
Brian Lehrer: [laughs]
Zach: I guess that's not the best thing for the environment, but--
Brian Lehrer: Combination, true confession, and advertisement for Walmart. [laughs]
David Owen: Well, it's true. They have an extremely generous return policy, and they take back stuff that you wouldn't think they would. Something that you point out is that the quality of products goes down. It's like free shipping. Free shipping isn't free. You're paying for it. It's factored into the cost. You just don't see it on top. The same is true with returns. Because we return so much stuff that manufacturers, they have to accommodate that, so the quality of stuff that you buy is lower than it would be in a world in which nothing could be returned.
Brian Lehrer: One of the items you write about with regard to the idea of free returns not being free because the anticipated loss is baked into the price of the item is mattresses. Talk about mattresses for a minute. How are mattress retailers making that calculation?
David Owen: Douglas talked about returning a bed. You can buy a mattress right now. You can go online and order a mattress, and it will come in these amazing boxes where they squeeze it down so that it fits in a box. Then, often, you have as long as a year to say you don't want it.
Brian Lehrer: Really?
David Owen: When you do that-- You can't resell a mattress. Goodwill won't even take a mattress that people have slept on, so even if the company takes it back, comes, and picks it up, it's not going to be sold again. I talked to a guy who was a private equity guy with an investment within an online mattress company. He said returns are 7% or 8% of sales, and they just factor it into the cost. Part of what you're paying for when you buy one of those mattresses is the certainty that some percentage of other customers are going to send them back.
One thing that's surprising is that manufacturers or retailers will often tell you-- You say you're going to return something, and they say, "Just keep it. We'll refund the money," because taking it back, shipping it back costs more than it's conceivably worth to them to have it back in their hands. It happens with very small things, but also, surprisingly, it happens with really big things. You could buy a sofa bed, an incredibly heavy piece of furniture, decide you don't want it, say you want to send it back, and then the retailer you bought it from says, "Just keep it" because the cost of picking it up and taking it back would exceed any conceivable value that would happen to them once it came back.
Brian Lehrer: Well, that happens with Amazon all the time. When we were planning this segment with you, people on my team were trading stories of Amazon in particular. Instead of being asked to send the item back, Amazon will just give you your money back and say, "Oh, you can keep it."
David Owen: Right, exactly. I suppose if everybody did that with everything they bought, there would be some adjustment, but they figure that there's some percentage, a manageable percentage of people, who do that, but it affects the quality of everything we buy. One of the people that I was talking to said that. He said, "Built-in obsolescence, which we've often talked about," he said, "it's not exactly that." He said, "The two pressures on a manufacturer are price point, so what you can sell an item for, and the period of the warranty period, the period in which you can send it back." It has to be-- The product only has to last through the warranty period, and it has to be cheap enough that you can compete with the people you have to compete with.
I think that goes a long way toward explaining the feeling that we all have that the stuff we buy isn't the same high quality of stuff that we bought back in the days before online shopping, before just almost universal ability to return stuff.
Brian Lehrer: Dana in Brooklyn. You're on WNYC. Hi, Dana.
Dana: Hi, Brian. Nice talking to you. I have a retail shoe store in Williamsburg called "Shoe Market NYC." Our main business is the brick and mortar, it's like 95% of the business, but we do a small amount of web business, which would be about 5% of our sales. I would say that the return rate is about 20% to 25% online versus about 2-3% in-person.
Brian Lehrer: Wow. That is really different.
Dana: Yes. We definitely love our in-person customers. [chuckles] [unintelligible 00:21:53] much more profitable.
David Owen: That's great. That's very typical. It's probably-- the in-store return rate is-- That's something to cherish because people have become increasingly willing to return stuff that they buy in-store. Certainly, that 20%, 25%, that's pretty standard now for online shopping.
Dana: Yes. It's probably standard, but more on the low side for apparel and footwear. We do always resell our shoes unless they're damaged. Even when they're damaged, we may fix them and give them back to the customer.
Brian Lehrer: Dana, thank you for that report from the front. [crosstalk] You want to pledge your store name again?
Dana: Yes. Shoe Market NYC in Williamsburg.
Brian Lehrer: Good luck out there. David, what were you going to say?
David Owen: I was going to say there's an advantage to being a relatively small retailer like that, where you can give that personal attention to products that come back. If it's somebody like Amazon, just the rivers of stuff that come back, in order to deal with them economically, people who handle returns have to have-- You have to be able to handle things very quickly and decide in a hurry what you can do with it and channel it to the right places. I went to visit that-- Apparel is the hardest. It turns out, serendipitously, that there's one of the few large-scale successful companies that handles apparel returns is right near where I live, and I went to see them.
The guy who owns the company said he's been doing it for 30 years. He says the whole key is to be able to be really fast. There were people who were unloading these enormous boxes of stuff coming back from a variety of retailers, and they could sort them quickly into the categories. They were doing what's called de-labeling, which would-- you go through and draw a black line through the label so that whoever sells it next knows that it can't be returned, and then repackaging it, re-hanging it, and then shipping it off to secondary-- to outlets and other secondary sellers where it could be sold again. Then some of it goes to what Amazon euphemistically calls energy recovery, or is called energy recycling, which is that you burn it. There's stuff that nothing can be done with.
Brian Lehrer: Yes, and a listener just texted, I have observed, with great sadness, the mountains that have arisen by our local garbage site, returns and poor quality products, cheaply bought, quickly broken garbage, the mountains covered by grass are growing. Let me sneak one more call in here with a story about where some of this stuff apparently goes. May in Great Neck, you're on WNYC. Hi, May. We've got 30 seconds for you. Hi.
May: Yes. Just want to say a couple of years ago, I went to visit my family, and it was interesting for me to find many brand name, from Gap, Anthropology, Old Navy, they sell in a store, and I asked, "Where do they come from?" The owner said, "From Dubai," which, it surprised me, and they sell. This because of sanction. I don't know how they go around and get to Iran. That's what my [unintelligible 00:25:09]--
Brian Lehrer: Your family, you told us, Weiner is in Iran. These stores were in Iran. Do you have a reason to believe these were returns to the [unintelligible 00:25:18]?
May: I saw by my own eyes. Then they had the tag of Gap and Abercrombie or Old Navy, they still-- they had their tag on. I think it's surprising if you see these numbers and then somebody sits and put their tag there.
Brian Lehrer: Secondary market, perhaps. May, thanks. Last question, David. Can you think of any success stories or examples of companies that have effectively managed returns and improved sustainability?
David Owen: I think it's really tough. I think you have to believe that you're being sustainable if you just find a market for stuff that comes back. The underlying, the overall question has to do with just too much stuff. Amazon can say, "Nothing that's returned to us ends up in a landfill." Assuming that that's really true--
Brian Lehrer: Do they say that?
David Owen: Well, they do. Nothing goes to landfill now, but, clearly, it obviously does at some point. It just means that they sell, to somebody else, stuff that they can't deal with. Clearly, at some point down the line, everything ends up in a landfill. You could go online now and bid on a truckload of Amazon returns. People will pay 10 or 15 cents on the dollar and hope that they can get 15 or 20 cents on the dollar when they sell it, but there's no guarantee that any of that stuff is actually usable. Obviously, some proportion of it ends up just as trash.
Brian Lehrer: David Owen, Staff writer at The New Yorker, with his article, What Happens to All the Stuff We Return? David, thanks so much. You shed light on, I think, a big, dark corner of the customer/consumer universe. Thanks for doing this.
David Owen: Thank you.
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