Your holiday gift returns cost retailers billions

Inside the business of returns
Inside the business of returns

'Tis the season to return unwanted holiday gifts — and for retailers to lament the impact of all those boomeranging sales on their bottom lines.

Approximately $70 billion worth of products may be returned this holiday season, according to returns logistics and solutions firm Optoro. While retailers can resell some of those items or foist them off on liquidators and discount chains, much of the value of returns is lost as they move through the supply chain.

Just how much do businesses lose? Last year, Americans returned about $284 billion in merchandise, according to the National Retail Federation. Optoro CEO Tobin Moore told CNBC anywhere from a quarter to half of that value cannot be recouped, leading to tens of billions of dollars of losses.

Close to 10 percent of goods sold at any time get returned, but the end of the year sees a surge in activity. Nearly a quarter of all returns occur around Christmastime, Optoro says.

How much retailers can salvage largely depends on the nature of the return, Moore told CNBC's "Squawk Box" on Monday.

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"Certain goods, if it's a higher-value product in a stronger brand, like an iPad or iPhone, it will come back and we can resell it for 80 percent of the value," he said. "However, if it's a lower brand that's not as well-known, and it's clothing and $20 originally, it may be worth pennies on the dollar."

Optoro works with 20 of the top 100 U.S. retailers to help them manage excess and returned inventory and resell that stock more efficiently.

That's important because inefficiency accounts for much of the lost value retailers absorb.

Once products are returned, a clerk will typically send it back to a distribution center, where it will sit for a period of time. Eventually, it's shipped to a liquidator and then to another distributor before eventually finding its way to a flea market or discount store.

This process is not only a drag on profits, but creates billions of tons of waste each year, Moore said. Retailers end up throwing away 30 to 40 percent of goods because it doesn't make sense to send them through this reverse supply chain.

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The returns economy also creates pollution as trucks ship items back and forth.

The problem has gotten worse in the age of e-commerce as consumers increasingly shop online and expect accommodative return policies, Moore told CNBC.

Some of the retailers that are best at efficiently processing returns are and Best Buy, he said.