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Retail waste adds up to big losses for merchants

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The ecommerce and omnichannel boom has had positive impacts for retailers and consumers, in sales and satisfying customer experiences. But the increase in online shipments carries a dangerous side effect: Increased packaging waste and unsustainable shipping resources.

The Verge reported on the environmental impact of ecommerce shipping:

Every single day this December, an estimated 1 million return packages were picked up through UPS alone. Each returned package leaves a trail of emissions from the various vehicles that carry it back to the seller. That pollution contributes to climate change and degrades air quality. Many of the discarded items head to a landfill. 

As shoppers’ preference for fast, free shipping increases, so do questions of waste, sustainability and environmental responsibility. January is a big month for returns, which contribute significantly to the problem. But solutions are on the way. We’re sharing an overview of why waste has become such a massive problem, how consumers and retailers can do better and why sustainable shopping and shipping is a smart financial investment.

Key takeaways
  • Consumers worldwide spent nearly $3.46 trillion online in 2019, up 17.9% over 2018 sales, meaning packaging also increased to accommodate those additional orders. 
  • U.S. retailers spent a record $1.5 trillion on shipping, warehousing and logistics in 2017. Shipping is becoming a cost center for retailers.
  • As the massive volume of omnichannel retail and ecommerce shipments increase each year, unsustainable waste problem will also increase — so it’s up to retailers to embrace smarter packing and logistics solutions to save money and their customer experience.

Retail waste starts with shipping

The volume of packages sent worldwide is astounding. Amazon shipped more than 5 billion items worldwide via Prime alone in 2017. And it’s not just Amazon contributing to the shipping madness — in 2018, Fast Company reported that among the three major shipping companies, about 165 billion packages are shipped in the U.S. each year.

A typical Amazon shipment comes in a box, bound with tape and stuffed with inflated plastic or paper to protect the item inside the box. Sometimes the shipments come in a large plastic or paper envelope. Each of those shipping pieces probably ends up in the trash. Even if the buyer is environmentally conscious and chooses to recycle the box, there are questions about the sustainability of the tape and shipping labels attached to the box. It’s hard for a shopper to know if they’re doing everything they can to reduce waste.

Most people — shoppers or retailers — just aren’t thinking about sustainability. Shoppers want their items as quickly as possible, and retailers want to make more sales. These attitudes over the holiday shopping season create the perfect storm of trash buildup with discarded packaging, return retail industry waste and unwanted presents bound for landfills.

Holiday shopping hits the trash heaps

Online shopping hit an all-time high in 2019. Cyber Monday alone saw $9.2 billion in sales, signaling an even bigger incoming wave of packaging waste. Jeremy Walters, sustainability ambassador for Republic Services, an industry leader in U.S. recycling and non-hazardous waste, told NBC News of the increase in waste tied to holiday shopping.

“Typically, between Thanksgiving and New Year’s Day we see about a 25% increase in volume or about 1,000 pounds of extra waste per household,” he said. 

The Verge gets into how returns create their own class of waste management concerns. Free returns add value for discerning customers, but they also come with a high environmental price:

  • Hauling around returned inventory in the U.S. creates over 15 million metric tons of carbon dioxide emissions annually, according to Optro — more than what 3 million cars might put out in one year.
  • Five billion pounds of returned goods end up in U.S. landfills each year. Often times, returned items are damaged on the way back, enough for a retailer to justify throwing it out over paying for it to be cleaned, repaired and returned to the shelves. 
  • Between 25 to 30% of the materials picked up by a recycling truck are too contaminated to go anywhere but a landfill or incinerator.

The biggest flood of returns will come on January 2 as people head back to work after the holidays. UPS expects to handle nearly 2 million return packages this year on the day known as “National Returns Day”. That’s a more than 25% jump from the packages it handled the previous National Returns Day. And it’ll likely get worse from here as Amazon, which has driven the new shopping trends, just expanded its free return policy.

Our biggest shopping season is quickly becoming unsustainable. Some retailers and logistics providers aren’t waiting for the holiday hangover to wear off before they take action. Trends in sustainable packaging and logistics are taking off, in hopes that new practices and better materials can reverse some of the damage and set higher standards for environmental stewardship on all sides of the retail transaction.

Leading the way with sustainability best practices

Reducing waste in shipping requires changes both in the types of packing used and best practices for efficient and cost-effective shipping. Sustainable packaging is an optimal solution to the omnichannel retail waste issue. Some of the biggest retailers in the world are driving significant trends toward using sustainable packaging and more efficient shipping and returns:

  • Amazon implemented Amazon Day in early 2019. A July 2019 Mashable article reported that Amazon is addressing problematic waste with Amazon Day: A dedicated day of the week for shoppers to request their package delivery. With this strategy, Amazon packs more items together into one larger box instead of sending out multiple small boxes across several days. This strategy can help reduce wasted fuel resources and emissions as well.
  • IKEA turned to Optoro’s Returns Optimization Platform to clean up their return waste act. Optoro’s logistics platforms help businesses divert over 99% of returned products from landfill, which eliminates waste by up to 70% and reduce emissions by 51%. Leaning into sustainabulity practices is good for IKEA’s brand and their bottom line. A study from Arris Retail estimates over $369 billion worth of sales were lost in 2018 from returns. 
  • United Kingdom-based department store John Lewis & Partners launched a pilot program for reusable click-and-collect bags in their stores, with the goal to cut out the use of additional plastics and to facilitate recycling the materials used to transport click-and-collect orders. Omnichannel’s growing popularity means this channel should also be a part of sustainability best practices.

Sustainability makes good business sense

It’s in a retailer’s best interest to embrace sustainable shipping. We’ve written about the importance of corporate social responsibility among consumers before, namely how 75% of millennials shop with the environment in mind and are willing to pay more for products with ingredients that are sustainable or socially responsible products. It’s no longer sufficient to say sustainability is the future. Sustainability is essential right now for retail longevity.

For retailers who are finding it hard to embrace the idea of system-wide change, the University of Pennsylvania Wharton Business School breaks it down in financial terms: 

Global shipping cost Amazon a whopping $9.6 billion in the third quarter of 2019 alone, and this year’s total is expected to surpass the 2018 total of $27.7 billion. Overall, U.S. firms spent a record $1.5 trillion on shipping, warehousing and logistics in 2017, according to the Council of Supply Chain Management Professionals. Saving time and money on logistics should be a prime motivator to make positive change. Embracing sustainability in shipping, packaging and logistics can help.

Get a deeper dive into logistics with our blog post on five keys for fulfillment, featuring a Q&A session with Supply Chain Management Review editorial director Bob Trebilcock. His advice focuses on key aspects of successful fulfillment like customer experience and automation and how any size merchant can use the Amazon Effect to their advantage.

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Chris Martinez

Chris Martinez

Chris is a content strategist at Signifyd.