Reverse Logistics emerging from the "dark side" and into earnings calls
Hey there! I missed sending out a post last week and really am sorry about that but…here’s my excuse…I was at the Reverse Logistics Association (RLA) Leadership Conference last week.
One of the hats I wear these days is that of the research manager for RLA. I spent time at the conference listening to members’ research needs and, best of all, their willingness to share data so that we can size the total, global, and regional returns market, figure out the average returns volume by type of business (retailer, manufacturer, etc.), by industry and lots more.
Reverse logistics is a fascinating part of supply chains that tends to get overlooked by many. Tony Sciarrotta, executive managing director of the RLA describes it as “the dark side” of supply chains.
But, as more businesses publish their quarterly or annual ESG (Environmental, Social, and Governance) updates, reverse logistics is finally getting some of the attention it deserves.
In addition, the much-publicized inventory issues that many retailers are dealing with are also resulting in interest in returns management. Based on surveys that RLA has done in the past year, most returns are handled in-house and are often done in the same distribution centers where store/e-commerce inventory is kept. So, yeah, space to handle returns may have been reduced in some facilities to make way for inventories.
However, some larger retailers such as Amazon, Nike, and Walmart, have separate facilities that handle returns. But we heard from a few retailers at the conference that have separate returns facilities and they too are experiencing pains – mainly from e-commerce purchases but also from strong, overall retail sales.
So, between ESG updates and inventory woes, mentions of returns/reverse logistics are popping up on quarterly earnings calls.
Recent commentary from earnings calls:
We continue to operate the most comprehensive consumer electronics and appliances take-back program in the U.S., collecting more than 2.5 billion pounds since 2009. Corie Barry, CEO of Best Buy (Aug 30)
In terms of the environment, we continue to drive forward the circular economy, a system in which nothing is wasted. Since 2009, we have reduced our carbon emissions by 62% through investments in renewable energy and operational improvements. We are on track to reduce our carbon emissions 75% by 2030. And last year, we became a founding member of the Breakthroughs 2030 Retail Campaign, which aims to accelerate climate action within our industry. Corie Barry, CEO of Best Buy (Aug 30)
Just as a fyi, a circular economy as defined by the Ellen MacArthur Foundation is - A circular economy favors activities that preserve value in the form of energy, labor, and materials. This means designing for durability, reuse, remanufacturing, and recycling to keep products, components, and materials circulating in the economy.
The Ellen MacArthur Foundation works to accelerate the transition to a circular economy. It develops and promotes the idea of a circular economy, and works with businesses, academia, policymakers, and institutions to mobilize systems solutions at scale, globally.
Regarding sustainability, we have launched exciting partnerships with Homeboy Industries, to facilitate a program to recycle clothing returned by customers. Carlos Alberini, CEO of Guess Inc. (Aug 24)
We have just begun a collaboration with a start-up company called Edmonton Climate Network to develop a solution to measure carbon emissions at the product level to optimize carbon emission analysis during the product development cycle. This platform will eventually allow the purchase of carbon offsets certificates creating a precise path to a net zero strategy. Carlos Alberini, CEO of Guess Inc. (Aug 24)
Other net sales, which principally include pop-up shop, shop-in-shop, and barter inventory transactions, increased from $10.2 million or 98.3% to $20.6 million in the second quarter of fiscal 2023 as compared to $10.4 million in the prior-year period. The increase is primarily driven by a pull-forward of planned open box returned inventory transactions with Icon, our inventory barter partner. Donna Dellomo, CFO, Treasurer, and Secretary of Lovesac (Sept 8)
As a reminder, our inventory transactions with Icon are part of our Circle to Consumer (CTC), Designed for Life (DFL), and ESG initiatives, where we repurpose returned open box inventory in exchange for media credits, which are being used to support our advertising initiatives to create brand awareness and drive net sales growth. Donna Dellomo, CFO, Treasurer, and Secretary of Lovesac (Sept 8)
Another fyi, Icon Industries is an RLA member and is a barter company. According to its website, it barters in real estate and media/fulfillment. An interesting tidbit from Icon – Most companies hold varying levels of unwanted inventory, capital goods, real estate, excess receivables, or other assets that aren’t performing or providing ROI. When businesses liquidate these assets, they typically realize only 10 – 40% of the book value.
One last fyi and I’ll end this post for now….
RLA is hosting a startup pitch contest at its annual conference in February 2023. We’ve received a great response so far but we’re looking for more. If you’re interested in participating and meet the criteria, let me know at cathy@rla.org. Thanks!
Cathy
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I wear a number of hats these days. Catch my weekly column on air cargo, freight forwarding, and the express markets, and the occasional podcast on Air Cargo World. I’m also helping out the Reverse Logistics Association as a research manager and at JOC I help out as a research analyst and write a weekly LinkedIn article, Freight Forward, summarizing JOC articles and providing an outlook for the week ahead.
In September I’ll be participating in a panel discussion on returns at the CSCMP Edge conference in Nashville and I’ll be moderating a panel session on the middle and last miles at JOC’s Inland Distribution conference in Chicago.
Speaking of JOC….be sure to catch Substack columns from Eric Johnson, Ari Ashe, and Bill Cassidy - all three are fantastic!