Many Unhappy Returns

Malls and stores become far quieter in January, as the holiday shopping frenzy fades. But the calm masks the arrival of a different but related season for the retail trade. Masses of unsatisfied gift recipients set in motion a season of returns, sending vast quantities of goods back into the complex supply chain from which they came. While this activity hits a peak around this time of year, it’s fairly constant year-round. By one estimate, we return $100 billion worth of products annually. Where does it all go?

According to Vaidyanathan Jayaraman, an associate professor at the University of Miami who has studied “reverse logistics” for years, companies have become more efficient at answering that question. In part, this has been a response to ecological concerns — minimizing the tonnage of your unsatisfactory purchases that end up in landfill. But, he says, it is also because companies have gotten better at converting returned goods into revenue. A paper that he and a colleague, Yadong Luo, published earlier this year in a journal called Academy of Management Perspectives included examples in categories like clothing, cosmetics and electronics.

For makers of computers and peripherals, the returns issue is particularly important, both because of concern about discarded electronics, or “e-waste,” and because such products become outdated so quickly by new innovations. They are, in a sense, “perishable,” as Jayaraman puts it. He says one way that firms like Hewlett-Packard, which he has followed since the late 1990s, have improved is the speed with which they categorize returns: the truly broken product, the still-good-as-new item sent back because of buyer’s remorse and the various possibilities in between. The point is to figure out what’s in good-enough shape to resell. “There’s a huge market” for returned electronics, Jayaraman says.

Much of this process is usually jobbed out to third-party specialists like Genco, which is based in Pittsburgh. Genco has 48 centers where thousands of specialists sort through returned merchandise in most every consumer category. Curtis Greve, an executive vice president at the company, explains that some of the things it handles go to wholesale salvage buyers or merchants abroad who buy by the pallet or truckload, and others flow to consumers willing to buy used products via eBay or other vendors. Retail Surplus, one of the company’s storefronts on eBay, for example, recently offered a Hewlett-Packard DeskJet D2430 printer, described as “an open-box return that ‘looks new,’ ” meaning the packaging “may be worn and retaped” but “the item should function properly.” (It sold for $14.49.) Another one of Genco’s eBay storefronts, Chance Deals, features even lower prices — and a blunt caveat emptor. (Greve says with a laugh that the only thing guaranteed about, say, a DVD player sold through Chance Deals is that at some point it really was a DVD player — though he also notes that Chance Deals has a positive feedback rating of 95 percent.) In all, Greve says, Genco liquidates about $3.5 million worth of merchandise a day.

Hewlett-Packard is one company that explicitly treats “reuse” situations as part of its efforts to be a good corporate citizen by reducing e-waste. Jayaraman says the best systems also involve recycling components from truly broken products. Still, it would be an overstatement to say that even such improved efforts have halted, much less reversed, that problem: Greenpeace, in its most recent assessment of various electronic manufacturers’ performance, notes that electronic-product life cycles have accelerated drastically in recent years, making such goods more “perishable” than ever.

Those who work in or study the front lines of the rejected-product economy have some interesting tales about how dissatisfied consumers are created — and what role we play in the process. Jayaraman, for example, mentions a printer company that found pages from school reports left behind by students who became suddenly unhappy with their purchase, immediately after the end of a semester. Genco’s Greve has an anecdote about a bread-making appliance that was being returned in perfectly functioning condition by a surprising number of buyers; the problem, it turned out, was that while the picture on the package showed a rectangular loaf, the thing actually made round ones. In recent years, Greve adds, the crush of postholiday returns has actually eased a bit. Is that because of improved product quality, perhaps? No, it’s the rising popularity of something else: “Gift cards,” Greve says.