Many unhappy returns

00:02
Speaker 1
When you order a pair of sweatpants online and don't want to keep them, a colossal, mostly opaque system of labor and machinery creaks into motion to find them a new place in the world. From the outside, you see fairly little of it. The software interface that lets you tick some boxes and print out your prepaid shipping label, maybe the UPS clerk who scans it when you drop the package off. Beyond that, whole systems of infrastructure, transporters, warehousers, liquidators, recyclers, resellers, work to shuffle and reshuffle the hundreds of millions of products a year that consumers have tried and found wanting. And deep within that system, in a processing facility in the Lehigh Valley, a guy named Michael has to sniff the sweatpants.

00:49
Speaker 2
Michael and the rest of the mighty american returns machine ahead on today. Explained.

01:01
Speaker 3
Yeah, Patty, back it up. Back it up. It's today. Explain.

01:09
Speaker 4
Amanda Mall, staff writer at the Atlantic. Who is Michael?

01:13
Speaker 1
Michael is a material handler. That's the type of job that he does. He works for a company called Inmar Intelligence, which is a reverse logistics and returns liquidator that has more than a dozen facilities across the country where they handle stuff that comes back from retailers, from online shoppers. But he is an employee in that Pennsylvania facility that I visited in November.

01:38
Speaker 4
Yeah, you went inside the returns machine, and I would like you to take us there. I think we all know how the first part of this works. You get a thing, you decide you don't want the thing, so you go get your gift receipt, your return receipt. You print out a return label. Maybe the package came with a return label, and you send it back. You walk it to FedEx or USPs or UPS, or they come pick it up, and that's it. You get a credit a day or two later, or maybe immediately. But what happens to the package?

02:11
Speaker 1
Well, if you're in New York City like I am, the first thing that happens is the package gets on 78 out through New Jersey into Pennsylvania. There is a town outside of Allentown called Briningsville, and it is a town that exists regionally in a lot of places in the country, which is the sort of, like, exurban area where a lot of logistics that serves a larger, denser population center happens from the outside in Mar intelligence. This particular facility that I visited is sort of anonymous. It doesn't really have much outward branding on it. There's just all these low slung, extremely large white or pale gray buildings sort of laid out over the course of acres and acres of land. The particular facility that I visited was 300,000.

03:02
Speaker 3
Wow.

03:02
Speaker 1
Yeah. The average regular Walmart, not a supercenter, is 105,000 sqft.

03:07
Speaker 4
So it's three Walmarts.

03:09
Speaker 1
Yes. What you're looking at is a facility that's the size of three Walmarts and a lot taller. Okay.

03:14
Speaker 4
And if you're driving down the highway and you saw it, you might be, wonder what that is. But then, like, a song comes on and you totally forget it. But you did not forget it. You went.

03:24
Speaker 3
Right.

03:24
Speaker 1
Right. When you walk into the facility, the first thing that hits you, or the first thing that hit me was that there's just so much cardboard. It's like walking into a cardboard forest, sort of. Most of the square footage is taken up with storage of various types, either pallets of returns that have come in and that need to be processed, or pallets of returns that have already been processed and are waiting to be shipped back out to their next destination. And then you hit these clearings in the cardboard forest where people are working on sorting different types of returns. The first set is drugstore returns. They are the returns processor for a large chain american drugstore. When you go in the fall and look at what has been returned, you're going to see a lot of, like, styrofoam coolers.

04:19
Speaker 1
You're going to see beach chairs, beach towels, seasonal merchandise that has reached the end of its lifespan for that year and is then headed out somewhere else to see if it can find a new life. And then the second section that you hit after you walk in is rugs in this particular facility.

04:38
Speaker 4
Drugs and rugs?

04:39
Speaker 1
Yes, drugs and rugs. They process an enormous amount of rug returns for a major online retailer. Something fascinating that I found out in the facility is that bracketing, which is the practice of buying, like, a size down or a size up from the size that you think you might need.

04:56
Speaker 4
That's called bracketing.

04:57
Speaker 1
Yes. Okay. That is really a well known practice in clothing. A lot of people do that. Like, you buy two pairs of jeans or three pairs of jeans, because one of these sizes will fit, probably.

05:05
Speaker 4
Wait, a lot of people buy three pairs of jeans and then just return?

05:09
Speaker 1
Oh, yeah. Super, super common.

05:12
Speaker 4
So much easier just go to the jean store, isn't it? I don't know.

05:15
Speaker 1
Yes, it is. What I learned at Imar is that a lot of people also apparently do that with rugs. What? That's insane. Absolutely insane. Yeah, it's wild behavior to do that.

05:30
Speaker 4
And that's why a fair chunk of this Inmar facility is dedicated to rugs.

05:36
Speaker 1
Yes. A really large part of it is dedicated to rugs, like, bigger than I expected it to be. Even though rugs themselves are big and therefore take up more space than, like, shoes, it is such a volume of returns that it takes up, like, a decent chunk of the 300,000.

05:50
Speaker 4
This facility is shoes taking up another fair chunk, because shoes, I would predict shoes.

05:57
Speaker 1
I didn't see that many shoes when I was there. Shoes do get returned, but they are lumped in with the apparel section, which is the next section you hit after rugs. They're significant apparel of all kinds, whether it's shoes, accessories, clothes, whatever, is a really high return rate category. So you get a lot of people processing those returns. And that's where I encountered Michael. So what you see are these series of stations. There was about two dozen of them, and each station is staffed by a single worker. And in front of them, they have a table. They have a lot of bright lights, so they can see the fine details of everything they're looking at. They have tools. They have sanitizing wipes. They have box cutters, they have scissors.

06:42
Speaker 1
They have all kinds of things that you might need in order to get a piece of clothing into good condition. They have lint rollers, stuff like that. And then they have a monitor that tells them what they have to do with every particular item of clothing that they're evaluating based on what the particular brand of clothing requires of Inmar. There's, like, this whole decision tree that workers like Michael have to go through, depending on the retailer that sold this product and what they will allow.

07:13
Speaker 4
Did you ask him what the craziest stuff he's ever seen was?

07:17
Speaker 1
Well, I did get some interesting stories in general from the various people that I talked to. The most common item that comes back with pants is underwear. Well, like, not new underwear, someone's underwear, like stowaway underwear. Somebody whipped on a pair of jeans that they had pulled out of the package that they just received. They put them on over whatever undies they were already wearing, and they decided, oh, I don't like these. So they just took the whole thing off. The underwear stayed in the pants.

07:49
Speaker 4
Hey, at least they were wearing undies.

07:51
Speaker 1
Yeah, at least the undies were present at some point in the process. They were present for too much of it, but at least they were introduced into the equation at some point, which is why that individual humans have to ensure that the underwear does not make it back to a new buyer. And they've found wedding rings in pockets. You find random jewelry. You get, like, an errant vape here and there. Clothing is such an intimate thing. It is so close to us, it interacts with so much about our daily lives. Even if all you're doing is trying something on that, the process of figuring out if it's brand new or if anything is wrong with it or what might be wrong with it is just really hands on, intimate work.

08:36
Speaker 4
So it's pretty clear what's going to happen here. If the piece is perfect, it's going back to the retailer, it's getting resold, but I imagine it gets much more complicated when there are some sort of imperfections here.

08:46
Speaker 1
Well, even if something is perfect, it might not necessarily go back to the original retailer. Clothing is a highly seasonal, high turnover product category. So even if something comes back and is totally pristine, the tags are on. Maybe it's the second size that somebody bought of an item and they tried on the first one and it fit, so they didn't even take the second one out of its wrapping.

09:11
Speaker 1
If it's toward the end of that product cycle, if they bought those two things because they were on sale at the end of the season, then probably in a lot of circumstances, the retailer isn't going to want that back because then it will just have to send it back to Inmar again in a few weeks to be processed again, to go out to a liquidator, to go out to a recycler, depending on what their preference is.

09:34
Speaker 2
Over 10,000 brand name fall fashions arrive.

09:37
Speaker 3
At TJ Max every week, so it's never the same place twice.

09:42
Speaker 1
So, depending on what the type of product is, if it's like in great shape or perfect, but it's just not cost effective for the retailer to take that back, or they know they don't want it back. Even if it is perfect, a lot of times that stuff will get put into the bin behind Michael, behind the material handler that is designated for liquidation. What that means is clothes are sold in bulk to retailers that deal with overstocks at the very high end of the market. You do get the brand names that consumers know. You get the TJ, Maxx and the Marshalls and things like that, and then that there's a whole ecosystem of middlemen, wholesalers, resellers beneath that will take other kinds of products that aren't necessarily fit for a sort of branded american consumer facing retailer like that.

10:44
Speaker 1
The next sort of tier of stuff is things that are either donated or recycled. So donation happens not dissimilarly to how it happens when you clean out your closet and take a bunch of stuff to goodwill it just happens on a much larger scale. Donation is like recycling is a little bit difficult to say what exactly happens to any of that stuff after it's donated, because then it's sort off the books. It's off the retailer's books, it's off Inmar's books. It's the job of the donation handler to figure out exactly how much of that stuff can actually be used by people in need.

11:20
Speaker 1
Available intel suggests that a lot of that stuff does end up ultimately in a landfill or otherwise disposed of, but it's really difficult to say how much because there's so many layers of middlemen that it becomes impossible to track what happens to a particular garment after a certain point.

11:37
Speaker 4
And is there destruction happening in the Inmar facility itself? Is there a category of stuff that just can't go anywhere?

11:46
Speaker 1
There is a category of stuff that just can't go anywhere. For multiband retailers, according to NMaR's data, it is about 15% of stuff that they receive back that is disposed of in various ways. There's not much destruction that goes on in Mars facility itself. They don't really incinerate stuff there. There are separate facilities for that, which is of course another layer of middleman, which is what makes it so difficult to figure out what happens to any particular product is that most things pass through many hands before they meet their ultimate end, whatever that might be.

12:28
Speaker 2
When we return on today, explained, amanda's going to tell us why you probably had no idea how complicated this process was, why retailers would rather, you know, not of this whole wide world of reverse logistics.

13:00
Speaker 5
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Speaker 6
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14:01
Speaker 5
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Speaker 1
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16:42
Speaker 4
Today explained. Back with Amanda Mall from the Atlantic. Amanda, it feels like Michael's a real hard work and sweet guy. Why is it that so many retailers would prefer to pretend like he doesn't exist?

16:56
Speaker 1
Well, the entire process of reverse logistics and returns liquidation and Michael's job, all of these things are sort of inconvenient realities for retailers. The general public is concerned about sustainability. They're concerned about waste. They feel like they're being constantly prompted to buy things. Knowledge of this sort of behind the scenes system and exactly how large it is and how large it must be in order to deal with all this wasted product is just not very good for the brand overall. No matter what brand it is. Nobody really wants to talk about this stuff. One thing that really hit me when I was walking through this facility is that you realize how unspecial all of this stuff is when it's just sort of like, piled in boxes, waiting to be inspected and deemed worthy or unworthy by a warehouse worker.

17:47
Speaker 1
It is stripped of a lot of its sort of, like, contextual power, that marketing and that display in stores or good stock images on websites. This is all made up stories about the clothes that we're buying, the things that we're buying, and pallets. And pallets of stuff that nobody wanted is a reminder that a lot of that stuff doesn't work out.

18:08
Speaker 4
How long has reverse logistics been this sort of integral part of our capitalism? Is it sort of with the advent of online shopping that we get here?

18:21
Speaker 1
Reverse logistics as an industry has on some level, existed as long as retail has existed. So, like, since the 19th century, for retail as we know it. But it was just a much smaller industry before the Internet, because TJ Maxx existed. When I was a kid in the 90s, when nobody was buying things online, TJ Maxx, it didn't have the enormous volume of potential inventory that it has now. Before online shopping, the return rate overall in retail was a single digit percentage. Return rate at brick and mortar stores still is a single digit percentage for things sold at brick and mortar. But online, your return rate is going to between 20 and 30% overall, and for some product categories, it's going to be closer to 50%. So online shopping enables retailers to sell more things to a larger audience.

19:15
Speaker 1
So you get more inventory overall and more sales overall, and then you get a much higher percentage of those sales being returned. So you just end up with a lot more extra stuff that nobody wants. And then the reverse logistics industry has sort of had to expand and become much more technical and much more data driven in order to adapt to that and in order to accommodate all of this stuff and find it a new place in the world.

19:45
Speaker 4
Retail has changed so much in the past, I don't know, 2030 years. You mentioned this phenomena of bracketing where you buy three pairs of jeans or heaven forbid, three giant rugs just to pick the favorite once they're all delivered by some poor SAP to your domicile. Would any of this be happening if retailers didn't make it so easy and so cheap to return stuff?

20:15
Speaker 1
I don't think so. I also don't think that we can put the rabbit back into the hat because what basically happened at the beginning of online retail is that retailers had to set these super permissive policies because consumers looked at shopping online and went, I don't think this is a very good idea. I don't think I want to buy clothes or shoes or bedding or sofas on the Internet. I think that is something that I would rather see in person. What a time that inclination on consumers part was correct. It is stupid to buy shoes online and it's just a thing we all do now because retailers have trained us to do it.

20:55
Speaker 3
I spent two minutes, two whole minutes, two minutes shopping for your gift. And it was so pleasant getting credit for a present that was really super easy to give. Thanks to Amazon.

21:14
Speaker 1
Part of that is this die off of local stores. A lot of towns in America do not have a healthy retail landscape of their own. A lot of malls have gone out of business or are sort of sparsely populated because online retailers starting in the mid two thousand s started offering really low prices that were so low that a lot of them weren't profitable. And then offering these sort of policies that allowed consumers to feel like there was no risk in buying online. At Zappos, we totally get how a job, kids and a mean crochet habit could contribute to forgetting to return those shoes for nine months. That's why we have free returns for up to a year.

21:56
Speaker 1
And then you get brick and mortar retailers who have existed for a long time and are then under sort of existential threat from Amazon and Zappos and this early set of.com retailers and they went, well, if everybody is going to buy this stuff on Amazon and Amazon's going to sell it so cheap, I guess we have to get on board with this. I guess we have to do something to compete with them. If this is where people want to shop and these are the policies that they expect and the policies that we have to offer in order for people to continue to patronize our business, then I guess we have to do this.

22:29
Speaker 4
Do you think the calculus could change? Do you think there could come a day where shipping seven rugs to someone is just wildly unsustainable and cost inefficient to the point where someone says, you know what? You can't do that anymore. You get your one rug, and if you don't like it, you could buy a second one.

22:52
Speaker 1
What we're seeing lately is that consumers are now going to have to start subsidizing their own habits. I think retailers have gotten to the point where it's like we can't just make prices higher, the habits that we've instilled in people and that we require in order to figure out what your size is at a new brand or figure out what kind of rug you need or whatever, those habits themselves have become deleterious to the company because they create so much waste. So on the one hand, you do contract with a third party that is supposed to extract the maximum amount of value from that unwanted merchandise as possible. But also, I think we see retailers starting to try to put incentives in place to specifically discourage these behaviors.

23:34
Speaker 1
You see a lot more retailers in the past couple of years starting to charge for returns again. It's happening, yes, pretty much across the board. Even Amazon, who is sort of thought of as the industry leader in these permissive policies, they have started to implement little fees here and there that are clearly intended, in my opinion, to guide consumer behavior. They want you to bring back your Amazon returns to a whole foods or an Amazon fresh or one of their retailers. And if you don't, then they'll charge you a and like that dollar, know a pretty tiny fee relative to how much it costs to take a return. But it is clearly a signal that Amazon, and therefore, like all other retailers, if Amazon is feeling this, then so is everybody, because they're about as well insulated from these issues as possible.

24:24
Speaker 4
How are consumers responding to those changes?

24:27
Speaker 1
Largely, they're responding by paying those fees. So far, there has not been any significant decrease, like industry wide in the return rate, based on all the data that I've seen across the board. And then when I asked Inmar if they had seen any difference since a lot of their retailers started implementing these policies designed to reduce returns, they said that their volume was as high as ever. So I think a lot of consumers are still in the process of realizing that these fees have begun to return and realizing where they're being nickeled and dimed in a more explicit way. So I think any behavior change that we see is probably a year or two or so in the future.

25:06
Speaker 1
But I'm not sure exactly how much we can reverse this behavior because the realities of trying to buy things in person have just changed a lot. The way we view the convenience versus the hassle of having to go out and do an errand has changed those habits, and those perceptions might change again over time. But it took us about 20 years to get to where we are with the sort of commonality of buying things online and returning the four sizes that didn't work. So this is not something that happens overnight. And Michael and people like Michael will have work for the foreseeable future.

25:44
Speaker 4
I'm happy for him.

25:46
Speaker 1
Yeah, good for him.

25:47
Speaker 5
He said.

25:47
Speaker 1
He used to work construction and now he's doing this. And this was easier, so I'm happy for him.

25:59
Speaker 2
Amanda Mull she wrote a piece called this is what happens to all the stuff you don't want. You can read it@theatlantic.com. Episode 1437 of today explained was produced by amanda big dog Llewellyn. She had help from amina al sadi, Laura Bullard, Rob Byers and David Herman. Take it easy on the rugs this year. We return with more today explained next week.