As Primark takes its first step towards home delivery, meaning it will face the challenge of online returns in full for the first time, new research has highlighted the extent to which returns remain a drag on profitability for online retailers. Nine out of 10 returned items lose value for retailers, according to data fromReBound Returns and Advanced Supply Chain (ASC).
Its Circularity Index surveyed 150 senior leaders at mid-to-large UK and European retailers. It found that circularity in returns is well-established, with 86% of retailers regularly utilising practices including resale, refurbishment, repair and recycling. For 27%, circularity is a core part of how returns are managed.
However, translating those strategies into commercial value remains difficult. On average, 12% of returned items generate no value, while only 9% of retailers resell more than half of their returned products at full price.
Reverse logistics research from the USA found that online returns happen at a rate of around 20%. Some retailers face return rates as high as 50 %, with per-unit costs of $6–$18 (£4.44 – £13.32). Over 10,000 tons of returned goods end up in landfills annually.
Opportunity to be captured
Despite this, retailers believe that there is an opportunity to be had here. 82% of retailers believe that up to half of their returned stock could generate additional value through enhanced recommerce strategies. A further 62% already make regular efforts to recover value from goods that cannot be resold.
Some retailers are already looking to capitalise on this aspect of recommerce. IKEA recently launched its Re-shop and Re-use Online resale platform in the UK that offers returned products at reduced prices. This has the benefit of keeping customers within the IKEA ecosystem, as well as helping to turn returns into a revenue stream.
Stuart Greenfield, UK & European sales director at Advanced Supply Chain, highlighted that online returns should be seen as an opportunity rather than just a cost. “The opportunity now is to look at what comes back as inventory with potential value, and determine the best route for each item, whether that is resale, refurbishment, repair, donation or recycling,” he said. “That requires greater visibility and better decision-making throughout the returns journey. What happens after a product comes back can have a direct bearing on margin, waste and the wider performance of a retailer’s circularity strategy.”
Increased regulation around returns
Inge Bujakiewicz-Baars, head of sustainability at ReBound Returns, pointed out that increasing regulation around circularity is also a consideration for retailers. “Regulation is bringing circularity further into day-to-day retail operations,” she said. “The focus is moving from commitments and targets towards the practical question of what happens to products once they can no longer be sold in their original form.
“Retailers that have clear processes for assessing, routing and recovering returned products will be better placed to respond to these requirements. Circularity needs to be built into operational decision-making, from inventory and returns management through to resale, refurbishment and recycling,” she added.
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