The $850B Problem Coming Back Through Your Door

Show Notes

Every retailer knows the returns wave is coming. Almost nobody is ready when it hits the dock in January. In this episode of Handled It, Joe Perkins and Brent Hillabrand sit down with Aaron Lamb of Toyota Automated Logistics and Chris Youngs of Carolina Handling to dig into the $850 billion returns problem, and why the fix starts long before anything ships.

The conversation gets practical fast: how product descriptions, fit tools and better tagging stop returns before they're ever ordered, what a real returns lane looks like versus pallets piling up in the corner, and why a wrong item shipped is the hardest return of all to bring back in. From there it's a look at how vision systems and AI are catching picking mistakes before they leave the building, how to tell a designed returns process from an improvised one, and what it costs when executives only watch what goes out the door. One retailer built a 200,000-square-foot building just to hold returns, and it gets used about three months a year.

In this episode, you will learn:

- Why returns are a predictable problem most operations still treat as a surprise

- How to push the problem upstream into descriptions, tagging and order accuracy

- What a designed returns lane looks like versus the pile in the corner

- Why a wrong item shipped is the hardest return to bring back in

- How vision systems and AI catch picking errors before they ship

- How to tell if your returns process is designed or improvised

- Why executives need to see the whole building, not just the outbound side

Returns don't start at the dock. They start with every decision made before the order ships. Learn how to shrink the wave before it forms, so January stops being a surprise.

Timestamps

00:00 Why Are Product Returns an $850 Billion Problem, and Why Does the January Return Wave Still Surprise Operations?

02:42 How Can Retailers Reduce Returns Before They Ship? Product Descriptions, Packaging, and Website Design

05:38 What Does a Well-Designed Reverse Logistics Returns Lane Look Like in a Warehouse?

07:36 How Does Order Accuracy and Error Rate Drive Returns? Wrong Item Shipped Explained

10:49 How Do Return Questionnaires, QR Codes, and RFID Tags Help Sort Returned Items?

14:01 Why Do Retailers Tell Customers to "Just Keep It"? The Cost and Customer Retention Trade-Off of Returns

16:29 How Can You Tell If a Warehouse Has a Designed Returns Process or an Improvised One?

19:59 Do Executives Understand What Returns Cost? Seasonal Return Space and the Case for Process Mapping 23:33 Which Upstream Fix Cuts Return Costs Most? LinkedIn Poll Says Better Order Accuracy

25:46 How Are AI Vision Systems and Goods-to-Person Automation Improving Order Accuracy? 

Transcript

Every year, the holiday sales rush is followed by a wave of returns. Operations know it is coming, but many still reach January without a clear plan for handling the products arriving back on the dock.

In this episode of Handled It, the team explores how to reduce returns before they happen and build a reverse logistics process for the items that do come back. The conversation covers buying decisions, product information, order accuracy, warehouse flow, customer retention, and the technologies that help associates get the right products out the door.

Plan for Returns Before the Holiday Rush

The team opens with a question: if the returns wave is predictable, why do so many operations treat it like a surprise?

Returns can feel like the maintenance nobody looks forward to doing. Sales and outbound orders receive attention, while the work coming back into the building gets pushed aside. Knowing that returns are coming does not automatically translate into preparing for them.

The discussion frames merchandise returns as an approximately $850 billion challenge. That scale makes it difficult to keep treating reverse logistics as an afterthought. Planning needs to begin before the products arrive, with decisions about space, handling, identification, and the steps each item will follow.

Reduce Returns Earlier in the Buying Process

Some of the most useful improvements happen before an order reaches the distribution center. Product descriptions, packaging, website features, and supplier information all influence whether a customer receives something they want to keep.

Apparel provides a familiar example. A shopper unsure about sizing may order several versions of the same item with the intention of returning most of them. Better fit information, customer reviews, and clear product images can help that shopper make a more informed decision.

The same idea applies to larger purchases. The team discusses tools that let customers visualize furniture in their own space. Seeing how an item will look before buying it can prevent an unsuitable purchase and the return that would follow.

Giving customers useful information early can reduce the work that warehouse associates would otherwise have to manage later.

Design the Flow for Products Coming Back

A warehouse may have a well-established process for receiving products from vendors and shipping orders to customers. Returns introduce a different set of requirements.

An item coming back may need a quality inspection, a fraud check, repackaging, or a decision about whether it can be sold again. Each of those steps needs a place in the operation and a clear path to the next activity.

Without that planning, returned inventory can end up wherever floor space happens to be available. Pallets accumulate in a corner, and the work becomes harder to organize and complete.

A temporary pile does not necessarily mean the process has failed. Even a prepared operation can experience a surge. The more useful question is whether the team knows how to sort, identify, process, and move those items back out.

Keep Picking Errors From Becoming Returns

Returns are also connected to the accuracy of the original order. If a customer orders a red shirt and receives a green one, the problem begins before the shipment leaves the building.

That mistake can create another error when the product comes back. The return information may identify the expected red shirt, while the physical item is green. If the mismatch is missed, incorrect inventory can find its way back into storage.

The team discusses checks during fulfillment, including visual inspections, weight checks, and automation that helps verify the item before it is boxed and shipped.

Order accuracy also affects customer trust. When a customer reports receiving the wrong item, the company's response can determine whether the experience is resolved or becomes a reason to shop elsewhere.

Gather Return Information Before the Item Arrives

Knowing that a return is coming provides an opportunity to prepare. Knowing its condition and the reason for the return makes that information more useful.

The team connects this to equipment coming back from a lease. Understanding its condition in advance helps the business plan the next steps. Retail returns can benefit from a similar approach.

A return request can capture whether an item was used, damaged, stopped working, or simply did not meet expectations. That information can help determine whether it should be inspected for resale, repackaged, donated, or routed through another process.

Collecting those details electronically before the product reaches the distribution center gives the operation an earlier view of the work ahead.

Improve Identification With Suppliers

Useful product information also needs to travel with the item. A label showing only a size may provide too little detail to identify the supplier, the specific product, or where it belongs in inventory.

The discussion moves further upstream to the vendors supplying the distribution center. Better identification at the manufacturing or supplier stage can support both outbound fulfillment and the return process.

RFID tags are one example discussed in the episode. Adding identification has a cost, but it can make it easier to recognize an item as it moves through picking and potentially returns.

The team encourages looking at the full process when evaluating those decisions. Information that seems minor at one stage can become valuable when an item needs to be identified and handled later.

Make the Returns Experience Easy to Complete

Collecting more information only helps if customers are willing to provide it. A long, complicated form can lead people to select a generic answer and move on.

The team recommends focusing on the questions that matter most to the operation. A short, interactive process can gather the details needed to route an item without creating unnecessary work for the customer.

That balance matters because the returns experience influences whether customers come back. Making the process easier can help protect the relationship while giving the warehouse better information.

The discussion also considers retailers that allow customers to keep an item rather than send it back. Freight and processing costs can make that decision practical in some situations, though companies also need to consider the possibility of abuse. The right approach depends on the product, the customer base, and the value that can be recovered.

Look Beyond the Value of Returned Merchandise

The cost of returns extends into labor, floor space, and customer relationships. Associates must receive, inspect, sort, and restock products while the operation continues managing its other commitments.

The team describes a retailer with a separate 200,000-square-foot building used to accommodate returns. That space brings real estate and staffing costs even when demand for it is seasonal.

Lost customers add another consequence. A frustrating return or an unresolved fulfillment mistake can affect future revenue as well as the original sale.

Those costs make reverse logistics a leadership issue. Executives need to understand what happens inside their warehouses to make informed decisions about processes, space, and automation.

Recognize the Difference Between a Process and Improvisation

Asking how an operation handles returns can reveal how much preparation is in place. If the answer changes depending on what arrives or who is working that day, the process may rely heavily on improvisation.

A more defined operation can explain the conditions that send an item through a particular sequence of steps. That clarity makes it easier to ask why the process works that way and where it can improve.

Dedicated space, quality checks, restocking activities, and planned movement through the building show that returns have been considered. They also provide a starting point for examining whether the approach makes sense.

The team emphasizes taking a first step rather than waiting for a perfect solution. Understanding the current process and following the data can help an operation make progress.

Use Technology to Support Order Accuracy

In the audience question segment, the team discusses a LinkedIn poll asking which upstream improvement would have the greatest impact on reducing the cost of returns. All respondents selected better order accuracy.

The conversation returns to the importance of sending customers what they ordered. Goods-to-person systems, automated storage and retrieval systems, picking vision systems, and weight checks can help associates verify products during fulfillment.

Vision technology and AI create opportunities to check details such as color, labels, and product orientation. Those capabilities can support both picking and quality control before an order leaves the building.

The team also discusses vertical lift modules that guide associates to a pick location. Across these examples, the purpose is to give people tools that help them complete the work accurately.

Cost remains part of the decision. As technologies become more affordable and capable, operations can evaluate where they make practical sense within their own processes.

Understand Which Returns You Can Influence

The closing ranking exercise explores reasons products come back, including incorrect shipments, transit damage, products that do not match their descriptions, and customers changing their minds.

Some causes are more directly within an operation's control than others. Accurate picking, protective packaging, and clear product information give teams specific areas to improve. A customer's change of mind may be harder to prevent.

Understanding those differences helps a business focus its effort on the problems it can address while preparing to handle the returns that will still occur.

The Takeaway

Managing returns starts well before a product arrives back on the dock. Clear product information, accurate fulfillment, useful identification, and early return details all help reduce the burden on the operation.

For the items that do come back, a defined flow gives associates a way to inspect, sort, and move inventory through the next steps. When leaders understand that work and plan for it, reverse logistics becomes a process the business can manage and improve throughout the year.