- [Narrator] This 165,000 square foot warehouse
is piled high
with liquidated goods, including the never-ending stream
of things we've all been returning.
(boxes clattering)
Liquidation company Quicklotz estimates that about 30%
of the products it receives are clearly used returns.
- A little charger, watch,
this is like a very expensive Swiss watch.
Of course, underwear.
- [Narrator] Customer returns are skyrocketing,
filling landfills and warehouses like this one to the brim.
- A pallet like this we estimate to be
about 20, $30,000 in retail value.
- [Narrator] So how did it all get here?
And how are retailers feeling the impact
of an increasing number of unwanted goods.
When that pair of pants you bought online
doesn't fit quite right, the solution is easy.
Return it and get a refund.
But after you mail them back,
where those pants end up is a bit more complicated.
- The best of all possible answers
is that the good gets repackaged and goes back on the shelf.
So it's ready for sale as a new item.
- [Narrator] But getting there is costly.
Reverse logistics company Optoro estimates
that on average it costs 66% of the price of an item
to process its return.
For example, if those pants you returned were $50,
it would cost the retailer $33 to take them back.
So many returns travel through a complicated web
of warehouses, secondary resellers, and landfills.
First up is a returns processing center
where the item gets inspected for damage.
Every company has a different set of standards
for what can be repackaged and sold again,
(cardboard clattering)
and plenty of things don't meet them.
Optoro says that many retailers throw away over 1/4
of returned goods in 2019.
The amount of returns and excess inventory
that retailers send to landfills
has more than doubled since 2016
from 4 billion pounds to 9.6 billion pounds.
But everything else is harder to track.
The rest of the unwanted goods filter
through a secondary resale market,
including retailer outlets and online auctions.
One path leads to liquidation companies like Quicklotz.
- Retailers, their business is to retail.
Their business is not to deal with rejected inventory.
They figure out
how to just streamline the process by liquidating.
(truck beeping)
- Companies like Nordstrom, Target
and Best Buy send products by the truck full.
Those trucks are filled with pallets
of both customer returns and excess inventory
or items that never sold in the first place.
- Everything comes bundled together as liquidation,
and a lot of times, even merchandise that are brand new.
They could have been returns
but they're hard to identify because they got returned
with tags in brand new condition.
- [Narrator] The company sells pallets wholesale
but it also sorts their items by category and condition.
Its clients are other resellers,
from people listing on marketplaces like eBay
or Poshmark to mom and pop discount stores
to flea market stands,
and now companies are dealing with even more returns.
According to the National Retail Federation,
customer returns across the retail industry are growing.
As e-commerce sales explode, online returns do too.
They've more than doubled in the past few years
from 9.6% in 2019 to 20.8% in 2021.
- So when we shop at a store, we see, feel, smell.
We know what we're getting.
When we shop online, we don't have that sensation
and so we end up buying more items
so that we can see, feel, smell, touch them.
(taping whooshing)
- [Narrator] Retailers themselves have made it easier
with long return windows and free shipping.
- Those policies that especially Amazon created years ago
has increased that convenience to the customer.
And because one retailer started,
everybody has to follow suit.
- [Narrator] Amling says retailers would rather eat the cost
of returns than disappoint customers,
but at the end of the day, returns still affect consumers.
- Those costs go into the price that they charge for items
and ultimately that cost is born by us.
(forklift rumbling)
- [Narrator] For retailers overwhelmed with returned goods,
offloading them to liquidators can be a relief.
- [Alan] It's a painful process
and they just want to get rid of it.
They just want someone else to do it.
- [Narrator] And it can be a way to recoup some loss.
Amling says if retailers think
that those goods will end up in a landfill, selling them
to liquidators instead can be an appealing choice.
Still returns eat into the bottom line.
- Retailers in a high-margin business and a large part
of that are all of the costs that go
in to things like returns.
That is actively cutting into the margins
that retailers make.
- [Narrator] But it's tricky to track the actual cost.
- The responsibility is diffused among different groups
within the organization.
Too many companies are not measuring the cost
that they're spending on reverse logistics.
- [Narrator] As returns increase,
some retailers are changing their policies
but it's not widespread.
- Companies that are selling goods that can be found
on other websites are gonna find it much more difficult
because if I can find the same product somewhere else
and it's free returns, that's where I'm going.
- [Narrator] But despite making small shifts,
Amling says retailers
aren't prioritizing dealing with returned items.
- Right now, consumers have no idea
what happens to a return once they,
let's say drop it off at a UPS store.
Once that becomes transparent, they will change.
(pensive music) (packaging rattling)