News / Tariff offensive could be doing a good turn for reverse logistics players

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Washington’s tariff offensive is threatening global trade growth and creating challenges for manufacturers, importers and logistics providers – but tariffs might prove a boon to the reverse logistics sector, according to the Reverse Logistics Association (RLA).

Tony Sciarrotta, the association’s executive director, sees an opportunity for the sector as tariffs drive up the price of goods, eating into the purchasing power of consumers. This could fuel a rise in reverse logistics, as damaged or malfunctioning products are increasingly refurbished rather than jettisoned and replaced, he reckons.

The Consumer Technology Association had projected that American consumers would spend $537bn on consumer technology purchases this year, but the trade war forced it to review that forecast.

“If tariffs continue to be enacted, you could see a reduction in that by between $90bn and $143bn,” said Brian Comiskey, senior director of innovation and trends, in a speech at the RLA’s annual conference in March.

According to MMR Research Associates, last year the global refurbished electronics market was worth an estimated $272.4bn and is expected to reach $487.3bn by 2032. In the US, returned volumes were flat in the second half of the year, the SLA’s returns index shows, but rising consumer interest in the face of higher-priced products could inject some momentum into the market.

Mr Sciarrotta envisages additional demand from the manufacturing sector. Rather than replace a domestically sourced part with an imported piece, producers may choose to have the defective part refurbished in the US, he suggested, adding that this would also align with environmental considerations.

ITS logistics is doing “a ton” of reverse logistics work, but almost exclusively for the retail sector, said global supply chain VP Paul Brashier. “Outside of retail we haven’t seen much interest or enquiries. I think other sectors are at a bit of a starting point there.”

Returns have been a challenge for retailers. To begin with, fraud is a considerable headache. In a survey by the National Retail Federation, 93% of respondents described fraud and other exploitative behaviour as a significant issue. Moreover, margins and customer retention considerations have caused nearly 60% to adopt a keep-it policy for items that are not financially viable to send back, according to a 2023 survey on holiday shopping trends by ReturnPro.

On the other hand, the RLA’s research team predicts retailers’ customised return policies will become increasingly sophisticated and widespread. Fashion retail group H&M has gone for software that leverages AI to generate personalised shipping and return fees.

According to Mr Brashier, logistics providers should have no problem picking up more return volumes, nor should returns for refurbishment pose a challenge compared with returning and replacing items, despite the added complexity.

“I think it should be okay for capacity. There’s enough slack in the system,” he added.

Rather than logistical capacity, he reckons that finding sufficient refurbishment capacity might be a hurdle.

Large logistics providers have ramped up their return services in recent years. DHL Supply Chain, UPS, Blue Yonder, and Accenture have all taken-over returns specialists over the past couple of years.

These moves should appeal particularly to small and mid-sized cargo owners. Mr Brashier noted that large retailers tended to contract their returns separately from delivery and sourcing streams, whereas SMB firms usually opted for one-stop shops.