Returns Are the New Revenue: Why Smart Retailers Are Betting on the Boomerang

For a long time, retailers have seen returns and the logistics needed to deal with them as a burden—a necessary inconvenience for handling excess stock. Managing these logistics, known as reverse logistics or the reverse supply chain, requires different skills because most manufacturers design their infrastructure only to distribute products one way: out into the market. But reverse logistics is no longer just about managing returns. Instead, it’s a strategic advantage, reshaping retail and sustainability and an essential part of the circular economy. Retailers that embrace recommerce (the practice of reselling previously owned or used products) are cutting waste, lowering costs and tapping into a secondary market projected to reach $4.04 trillion by 2034. The only challenge is mastering the logistics.

The Overstock Opportunity

Returns are an important customer service experience, but ultimately, a disposal task. They can be costly and, frankly, a headache. That has prompted more companies to want to deal with them more efficiently and profitably. Because we mostly buy online, we return more. According to IHL Group, overstock (which includes unsold products, returned items that can’t be sold as new and warranty-covered products) costs retail businesses $562 billion. This is just one number that shows how expensive and wasteful the old ways of handling returns are. But it also shows there’s a big opportunity.

Many brands and retailers are sitting on a goldmine of surplus products (or overstock) that can be refurbished, remarketed and sold again. This turns unwanted products from liabilities into profitable revenue streams while also giving products a new life and offering more sustainable shopping options. It is what many of us know to be a circular economy. The key here is that the infrastructure, not the product itself, is circular. That’s why reverse logistics are key to making it a reality.

Logistical Challenges of Recommerce

A true circular offering means providing customers with the means to return pre-owned products, usually in exchange for credit towards their next purchase. The products are then refurbished and sold back to customers. As the more sustainable choice, it gives consumers an option beyond buying new stuff. The consumer technology industry has been doing this for a while. Brands like Apple and Samsung make it easy to ‘trade in’ your old device when buying a new one. It’s a slick experience that keeps customers in the ecosystem. It also feeds the secondary market, capturing buyers who might have otherwise bought a cheaper device from another brand. But it has taken years for those brands to get to this point.

Managing reverse logistics isn’t a simple plug-and-play activity—it requires constant monitoring and improvement. Processing returns can cost retailers up to 15 percent of their revenue. It’s expensive, so retailers need to be efficient. That’s why 75 percent of retailers plan to invest in reverse logistics automation in 2025, and for good reason. Reverse Logistics is growing by about 9.4 percent per year.

Brands need to do a few key things or invest in them to get this right. The first is investing in inventory-tracking tools. This is crucial for spotting patterns in return trends and making predictions for the secondary market. Similarly, brands must follow the resale market closely to anticipate shifts and proactively manage inventory, pricing and supply. The next step is to partner with reverse logistics specialists in the market. These companies have helped other brands while remaining focused on their core objectives. They also tend to understand regional regulatory complexities and potential legal restrictions around refurbished goods, which are crucial to know when scaling.

Another area that needs addressing is frequent sales and discount promotions. This can be a hard sell for brands that rely on seasonal sales. However, consumers will not buy a refurbished product if it’s the same price as a new one on sale. For the circular economy to work, and the investment in reverse logistics to be justified, brands need to work towards structured pricing and certified, high-quality refurbished goods to attract new customers who want to spend less.

From Burden to Breakthrough 

All this talk of investment in reverse logistics to support the circular economy is excellent news for both businesses and the planet. Every pre-owned, refurbished or reused product sold means less landfill waste and less pressure on natural resources. For example, refurbishing a smartphone (instead of manufacturing a new one) directly saves 64kg of CO2, 244kg of raw materials and nearly 76,000 litres of water. Brands that handle returns well can help the environment and create lasting value for their business and customers. Getting it right is a commercial and circular win.

James Murdock is Co-founder and Chief Marketing Officer of Alchemy, the world’s fastest-growing circular technology company. With over 20 years of experience delivering marketing and business operations across leading tech markets, he is a leader in driving innovative solutions to reduce e-waste and carbon emissions.