Andrea Lockerbie explores the world of reverse logistics, minimising waste and improving sustainability in supply chains.
When a consumer or end-user needs to return a product to a retailer or manufacturer, the process of the product travelling back through the supply chain is known as reverse logistics.
It plays an important role in terms of sustainability as a good reverse logistics system can ensure that the products going back through the supply chain are appropriately assessed and efficiently diverted so that their value and lifespan are maximised and waste is minimised.
This means returned products or surplus stock are directed for reuse, repair or recycling, rather than disposal.
Key components of reverse logistics include:
- Returns management – Deals with regular customer returns and should be a seamless, easy experience for customers, to bolster brand image and customer loyalty.
- Remanufacturing or refurbishment – Returned products are brought back to a good saleable condition, through steps including cleaning, repairing, replacing components and testing.
- Recycling – An option for products that are damaged beyond repair, to ensure materials are reused and resources are conserved, rather than disposed of.
- Disposal – This should be the last option, to ensure responsible disposal that minimises environmental impact and complies with regulations.
As consumers, most of us are likely to have had the experience of buying something and later returning it. The reasons for returns are varied, from receiving damaged goods to the item not meeting expectations, ordering multiple items to choose from or simply buyer’s remorse.
According to the ‘2024 Consumer Returns in the Retail Industry’ report by the US-based National Retail Federation (NRF) and Happy Returns, retailers estimated that 16.9% of their annual 2024 sales would be returned, at a value of $890 billion – that’s more than double the 8.1% yearly return rate in 2019.
A separate NRF study found that, on average, retailers’ online return rates were 21% higher than their overall return rates, and holiday return rates were 17% higher.
Jonathan Gorst, Division Head of Marketing, Enterprise and Events Management at Sheffield Hallam University, has spent years researching reverse logistics, how companies can be more efficient in processing returns, and the disposition (actions taken regarding returned products) of returns.
He says: “People just don’t appreciate how much product is shipped back in terms of the volumes, the financial costs, and then if you start multiplying that through, the CO2 emissions go through the roof.”
The challenge is that returns come in all sorts of shapes, forms and sizes in contrast to outbound logistics. As the items get bigger, the challenges become greater, Gorst says.
The NRF found that ‘free returns’ were a key factor for customers when deciding where to shop (76%). Meanwhile, for retailers, improving the returns experience and reducing returns rates were two of the most important elements for business in 2025 – they want to keep customers happy and costs down.
But as Erica Ballantyne, Senior Lecturer in Operations and Supply Chain Management at the University of Sheffield explains: “There is no such thing as a ‘free return’. It costs the retailer, and it costs the environment.”
Once products start moving around the supply chain, each movement incurs transport emissions, cost and potential for damage.
Finding solutions for the returns problem
UK-based ClearCycle was set up in 2016 after its founder saw returns volumes in his retail business grow each year.
He had to sell these returns to either an auction house or a ‘jobber’ in bulk for cash but didn’t like the poor financial result of this, the loss of brand protection, and not knowing where the stock would end up.
When he found out that around 10% of furniture sold comes back as returns, he set out to provide a solution. His customers now include the likes of Swoon.
Daniel Hague, commercial director at ClearCycle, says: “A lot of the stock that we deal with is the wrong shade of grey, won’t fit through the door, picking errors. So, we then refurbish those pieces of furniture and sell them, to try and give them a second life.”
If an item was returned and there was nothing wrong with it, it could be cleaned and returned to the retailer for resale.
However, Hague says: “The hardest thing about that is actually the packaging, because frequently the packaging is torn, and as soon as the packaging is in some way damaged if I delivered what is essentially quite an expensive item and the box has obviously been torn, you will feel slightly aggrieved by your purchase.”
Ballantyne explains that there are now re-boxing machines that can be used to create bespoke, plain boxes, rather than full-colour branded packaging. The machines scan the product, determine the dimensions, and make a box to fit.
Gorst adds: “The box might cost 1-2% of the overall purchase price but [retailers] were doing 50% discounts because the box was damaged or non-existent, so purely by re-boxing you’ve got a pristine product again.” However, that requires the item to get back to the warehouse undamaged.
Packaging is often removed and discarded by customers, who then decide to return items. This is particularly problematic for furniture or mattresses, which get damaged or dirty if unpackaged.
Hague explains: “Carriers have frequently tried to deal with this, with blankets. That works if you’re doing household removals because it’s on one vehicle, you can protect it, but as soon as you’re moving it from vehicle to vehicle, location to location, blankets just don’t work.
“So, we’re trying to get the carriers to adopt reusable bags so that we can push down that route to protect the asset.”
One reason the rate of returns is so high is failure to meet a customer’s expectations. This is often the case when buying online, based on an image.
Hague explains that for retailers, accurately describing items, and questioning why they are getting returns, is critical to reducing returns, which will improve sustainability.
“One of the very first things you do in logistics is ask: Is the product right? Am I accurately describing it? Am I mapping out the customer journey? Is the packaging suitable to get it there? Am I using the right carrier?
“If you do those things, you can get rid of a significant amount of your returns ahead of them becoming returns.
“Then, you need to say, right, it is now a returned item. Why is it a returned item? Let’s capture the data. Some customers will lie to get a full credit.
“You try and find out as much information. Is it packaged? Ask the customer: are you able to re-pack it in any way? If they can, great. If they can’t, get a carrier that’s going to send a bag to bring the item back. Get it back, inspect it, look at your returns, and look at the data, because if you start to follow the data, you will find out why you are getting returns, and then you can maybe change your behaviour or the customer’s behaviour in advance.”
Ballantyne agrees, adding that an effective system means “understanding and measuring what you’ve sent out so that you know what you’re getting back” as “not enough companies have a really good grasp of this” as well as understanding the mechanisms used to bring products back.
But Gorst warns of poor data. “A retailer will say, ‘Why are you returning the product?’ And generally, a consumer will put whatever is at the top of the list… if people always pick the top reason, it makes the data dubious.”
Technology and the expansion of trade-ins
An interesting area of development is for retailers or brands to offer a trade-in service for unwanted products when you buy a new one, thereby pulling old products back into the system.
Birl is a UK start-up, currently scaling up, that has created a solution for brands to allow consumers to trade in an item when they buy a new one. It is starting in the premium fashion space, with Sirplus an example of a retailer already on board.
The concept is that you can buy new and sell old at the same time – where Birl differs is that the customer will get credit straight away via a code before they send their old item back. Trade-ins can be done easily online and in-store with free digital labels.
Returned items are triaged and processed, either for resale on preloved marketplaces, resale on a brand’s own secondary site, listed on third-party rental sites, or sold through live commerce channels.
Peter Lydon, co-founder and chief product officer, explains that it is in the process of partnering with a large European logistics provider that has a renewal workshop – and the long-term plan would be for items to go to a central location for processing where they would be digitally set up for re-sale.
Birl is about to go live with its first premier league football club, West Ham, for the kit launch at the start of July, which will see it stress test a high volume of trade-ins over a few days. But Lydon says the solution is “industry agnostic” and could be used for other categories where products are high value and repairable.
Another start-up in the trade-in space is Returnal, co-founded by Jake Margiotta and Luke Davies, who used to work in an auction house selling retail returns.
Margiotta explains: “We became aware that there was this trend towards circular models, and we started to interview our customers about their plans in that arena and established they had big ambitions… but no capacity to actually deliver those plans.”
They left to set up Returnal about 18 months ago and recently secured venture capital funding and launched with their first customer, a regional department store in the East Midlands called Downtown. Initially, they are targeting DIY retailers, furniture retailers and department stores – but believe the solution will work for any category.
Margiotta explains: “As a business, our core function is providing the customer-facing technology for enterprise retailers [large-scale retailers] that allows their customers to trade in products they no longer use in exchange for store credit.”
“So, it’s a customer retention strategy, but in the background, we service the technology with an ecosystem of partners who can refurbish and resell these products on behalf of the retailer.
“We are therefore extending the life cycle of these products, creating efficiency, promoting and feeding the circular economy, allowing these retailers to source ethically from products that are already in domestic circulation,” he says.
Returnal will configure a solution to meet the retailer’s needs. Customers get an instant estimate of credit and receive a QR code so they can drop the item off at a local parcel shop.
Once the relevant specialist partner receives the item, it confirms the credit can be released, refurbishes it, and sells it, with any residual resale value returned to the retailer.
Margiotta says there is recognition that Gen Z, the next generation of consumers, prefer to buy pre-loved. Also, most brands are already being sold on resale platforms.
“We’re saying, you as a brand should own and control your own secondary market, and that’s what our technology allows them to do,” Margiotta says.
He is also keen to do good. “We started this business because we wanted to have an impact, and we recognise that these large retailers gave us the best platform to have an impact at scale. So, we advocate for charity partnerships and donating as many of these products as is reasonably possible to social impact causes.”
Adding social value
In the UK, one of the ways that businesses can divert returned items to reuse and create social impact is to work with the Reuse Network, a membership body with over 100 reuse charities across the UK.
The organisation seeks on-going commercial donations of returned or overstock items, which its charity members then collect and prepare for resale or donation.
Hannah Jordan, chief operating officer at the Reuse Network, explains that working with organisations that offer take-back schemes is particularly effective. For example, they run a white goods contract with a retailer alongside a logistics company.
The retailer offers a paid-for take-back service for pre-loved white goods on delivery of new white goods, which is often cheaper and more convenient than a council collection.
When the take-back service is used, items go back to a warehouse, and the charities working within that contract can then choose products to take back to their sites to prepare for resale as affordable second-hand white goods, or donations.
To demonstrate the value of this work, the Reuse Network will put together social impact reports that detail factors such as the number of households helped, CO2 savings compared to landfill, and average cost savings compared to buying new.
No silver bullet
As Ballantyne says, there are examples of parts of the reverse supply chain that have been looked after very well, but there isn’t a perfect example of the ‘way to do it’, as what works for one category or one type of location won’t work for another.
For retailers, avoidance of returns is “still at the top of the list” and “then it’s thinking about being more efficient with your processing – and then comes sustainability”.
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