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On-line … waste economy

Roberto Saracco February 20, 2022 Blog 171 Views

On-line commerce keeps growing, so does the return of items bought on line. In the graphic the growth in the last three years, 2019-2021. Out of a trillion $ on-line sales in the US, 218 billion $ of merchandise have been returned. What happens to those returned items? Image credit: National Retail Federation

Three months ago I wrote a post discussing the growing issue of apparels returns following on-line shopping. Now I stumbled onto a very interesting article (a must read, I would say) explaining what is actually happening to returned apparel.

First of all look at the statistics:

  • increasing on-line shopping, from 427B$ (US market data) of 2019 to 1 T$ in 2021 (a 211% growth)
  • increasing returned items, from 41B$ in 2019 (around 10%) to 218B$ in 2021 (21%, an increase of 531%!!!)

Notice that the big leap in return increase has happened between 2019 and 2020 (the first “Covid year”) with return increasing from 41B$ to 102B, a 249% increase in return vs an increase of 132% in spending. Spending almost doubled between 2020 and 2021 with return more than doubling in the same period.

At first glance it would seem that Covid pushed many more people to shop on-line and, possibly among the newcomers, the percentage of returns skyrocketed. 2021 has been a stabilisation year in a way (Covid still dictating people behaviour) with people getting used to shop on-line for apparel and returning them at an unsustainable (for the biz) rate. One out of 5 apparel is returned in terms of gross value.

The above figures have been gathered by retail analytics firm Edited, which tracks over 4 billion distinct items for sales across 140,000 retailers in the US.

The author of the article used airtags to track the “journey” of some returned items with some very interesting results (check the article). I should say I was also intrigued by the use of airtags to track returned merchandise. This is really opening up a window on the backstage of ecommerce (not to mention privacy issues…).

It turns out that the processing of returned apparel in the range of 20$ cost around 13$ making it unworthy. Many returned apparels are destroyed and many are sold in third world Countries at a fraction of the original price (barely recovering shipping cost). Keep in mind that we are talking of some 800 million pieces that are returned! Even assuming a recycling of 50%, it means 400 million apparels go to the dumpster.

The waste economy is getting bigger and bigger!

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About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.

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