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Mark Manduca on the floor of New York Stock Exchange on Aug. 2, the day GXO Logistics became a publicly traded company. (GXO via YouTube)

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GXO Logistics Chief Investment Officer Mark Manduca detailed Aug. 24 what is driving a rise in online returns and what that may mean for transportation.

The XPO contract logistics spinoff on Aug. 17 released its first global survey, which focused on trends in e-commerce and returns. The findings showed 36% of retailers say online returns have increased over the past 12 months. It also found as many as 35% of goods bought online are returned.

“People are obviously still at home, trying things on, with more time on their hands, arguably, because they’re not having to commute, thus returning more items,” Manduca told Transport Topics. “Which is what we saw through the pandemic as a theme.”

Cawston

The GXO survey also found 37% of retailers said returns have increased their operational costs, and 42% of consumers said they returned a piece of apparel online in the past year. It also found 72% of retailers are investing in their returns management processes.

“We’re seeing a rapid increase in outsourcing from retailers,” Richard Cawston, president of Europe for GXO, said in a statement Aug. 17. “They want to de-risk their supply chains. They’re looking for a technologically advanced logistics partner with scale to support their e-commerce growth, including a rising need for returns management that requires specific expertise in technology to optimize inventory.”

Manduca noted when people go into a store they can see what they are buying firsthand and, for products such as clothes and shoes, there often are fittings. But with e-commerce, it’s very hard to do that. He noted that’s why as e-commerce rises the return rates accelerate.

“Naturally, that has persisted into the later rounds of the pandemic,” Manduca said. “Reverse logistics is clearly a theme because many people in the warehousing, or rather in the retail space, are constantly contending with this.”

Manduca added the pandemic has gone on longer than some experts thought. This has driven more e-commerce, which results in more returns compared with buying merchandise from a traditional brick-and-mortar store. But he also believes these drivers of reverse logistics are here to stay even after the pandemic subsides.

“We’ve seen it in our own revenues growing at around 16% in the last couple of years, between 2018 and 2020,” Manduca said. “Our revenues are roughly $522 million coming from reverse logistics. So it is a big line item for us, and one that could get a lot bigger and I think it will. So, it’s an exciting time to be at the cutting edge of this.”

This rise in reverse logistics ultimately is good news for transportation as returns have to be shipped back to the warehouse or retailer, which adds to volumes. There also are the corrected orders that have to be sent back.

“More volume movement and reverse logistics is providing an extra layer of growth on already very strong e-commerce trends,” Manduca said. “It’s one of the many reasons why we’ve seen tightness across the value chain. People’s buying patterns have changed.”

The takeaways from our latest survey are striking. Consumer are skyrocketing, and over a third of everything that's bought online is being sent back. /1 — GXO (@GXOLogistics)

Manduca added these trends are persisting into the early parts of peak season. He also pointed out that transportation modes such as trucking already are squeezed by capacity issues and the driver shortage. So, while the increase in returns means more business, it also means added stress on an already strained sector.

“What does tightness breed? It breeds price increases ultimately, and ultimately it breeds inflation,” Manduca said. “That is the market that we’re in right now. And it’s certainly not showing any signs of debasing. I think inflation is very much here to stay.”

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Manduca noted the more e-commerce there is, the more reverse logistics increases. He added that creates a flywheel of growth, and in the current environment that means reverse logistics is a multiplier of gross domestic product many times over. He warns retailers and warehouses may have trouble coping with the current situation.

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“You need to make sure that you’re at front of this, which is why you need a third-party logistics provider even more so,” Manduca said. “This is a business that ultimately saves you money by actually saving you sales. Because it gets the product back to the store quickly.”

Manduca noted that’s why ultimately retailers need a scaled player that is not doing this for the first time —a third-party logistics provider that understands reverse logistics, inventory management and has invested in technologies such as automation.

XPO Logistics ranks No. 2 on the Transport Topics Top 50 list of the largest logistics companies in North America and No. 3 on the TT Top 100 list of the largest for-hire carriers.

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