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 Jimmy Choo 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 the one 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 company headquartered in Washington, D.C.
The returns business is booming, thanks to an increase in shopping online, where return rates are higher 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 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-giving season, as good intentions give way to panic and last-minute delusions about how happy your loved 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 retailers they’re not allowed to publicize, will be bought by resellers and end up in neighbourhood stores, at flea markets, on Kijiji and Craigslist, even on Amazon, where many of them were purchased in the first place.
The bad news for shoppers is that liberal return policies in effect today are costing retailers big money and may not be sustainable.
“Retailers are concerned, absolutely,” said Diane Brisebois, president and chief executive officer of the Retail Council of Canada.
“Eventually, I am guessing, someone will blink and say: ‘We just can’t ship and accept returns for free 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 to judge a product without seeing it in person.
Some online shoppers order an item in different colours and sizes, knowing ahead that they will be returning all but one of them.
There’s a learning curve when it comes to online shopping, Brisebois points out; once people figure out 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 and virtual 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 order to 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 goes back on the shelves.
Other retailers won’t return an item to the shelves if the packaging is so much as wrinkled.
Returned items follow different journeys. Some are returned directly to stores. Some retailers direct 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 fee paid 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, being unboxed, re-boxed, resold, unboxed and sold again — possibly even shipped by mail again and returned again — doesn’t seem all that environmentally friendly.
That’s actually not the biggest problem, said Emily Alfred, waste campaigner with Toronto Environmental Alliance.
“Once you get into the shipping and retailing stage, it’s just a tiny, tiny fraction of the environmental 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 operating earnings 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 department stores 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 be sold in season at full price, not at reduced prices or at liquidation prices because the items are used, worn or damaged.
For now, businesses such as Liquidation Services, and the people who buy from them, will continue to ring up sales.