Retailers hope to sell more than $650bn of goods this season, roughly
the annual economic output of Switzerland. Ideally, companies’ supply of
products would precisely match demand for them. In reality millions of
items will stay on shelves or get sent back after purchase—in all of
2015 Americans returned goods worth $261bn, out of a total $3.3trn sold.
What happens next?
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Dealing with unwanted goods can amount to a tenth of the cost of making
and distributing them in the first place. But for a whole string of
logistics firms, discount chains, brokers, dollar stores and more, they
are a big earner.
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Last year, for example, FedEx spent $1.4bn to buy GENCO, a specialist in
so-called “reverse logistics”. The world’s top clothing retailer is now
TJX, which snaps up surplus inventory and shifts it at a discount.
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Last year KKR, a well-known private-equity firm, invested in a company
called Channel Control Merchants, which calls itself an “extreme-value”
retailer and exporter of excess inventories.
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Many goods will end up going into landfill.
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Inmar, which offers an array of reverse-logistics services, is often
asked to cut labels from apparel, so someone can’t try to return items
to a store. Such anonymisation also leaves a brand untarnished, as its
clothes are then flogged on a global bazaar for unwanted items that is
known as the secondary market.
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This market is vast and complex. Sales for the American part alone
reached just over $486bn in 2014, according to research by Dale Rogers
of Arizona State University and Zachary Rogers of Colorado State
University.
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More e-commerce means more returns, as customers buy goods without
seeing them, often in several sizes, then send back what they don’t
need.
http://www.economist.com/news/business/21710855-what-happens-all-goods-shoppers-dont-want-business-reselling-returned-shop-items
