As today’s shoppers make more purchases online, they have higher expectations for speedy shipping and seamless return policies than ever before. Although the world of e-commerce may be more convenient for consumers, it’s produced significant logistics challenges for retailers buried in returned inventory.

Mobile Warehousing and Storage (MW&S) uses trailers to create warehouse space, offering flexible, innovative solutions that allow retailers to revamp their supply chains to embrace new ecommerce expectations.

Rising Returns

While retail returns have historically represented around eight percent of total sales, that number shoots to as high as 30 percent for e-tailers, according to a CBRE study. Returns are three to four times higher online than at traditional brick-and-mortar stores. As more and more shoppers abandon malls for the comfort of shopping from their couches, retailers have needed to figure out a way to recover value from the onslaught of returned inventory.

Additionally, company return policies are becoming increasingly important to consumers as they decide where to shop online. According to a Narvar study, restrictive, complicated or unclear policies can prevent shoppers from making a purchase, with more than two-thirds saying they’re deterred by paying for return shipping and restocking fees. On the other hand, effortless returns stimulate loyalty. Ninety-six percent of consumers would shop with a retailer again because of an easy return experience.

The consumer demand for rapid delivery is growing as well. What was once two-day delivery has become same-day delivery, and retailers are facing immense pressure to continue reducing that timeframe. As a result, retailers have had to adjust the way they think about logistics real estate. In order to meet customer expectations, they can no longer rely on a few distribution centers interspersed along the coasts. Instead, they must establish a wider geographical network, with centers strategically set up all around the country.

Surge times also require retailers to look for additional space, especially during the holidays, when consumers send back an average of one million items per day from December to early January, resulting in as much as $37 billion worth of returns. But the holiday shopping season isn’t the only time companies are racing to accommodate inventory spikes. For example, during the Super Bowl, electronics recyclers are inundated with discarded televisions as fans purchase the latest and greatest flat-screens before the big game. The process of sorting through the recycled TVs, stripping them of valuable metals, and recycling the plastic and glass is both time-consuming and costly. And it doesn’t all happen at once. The recycled items must be stored throughout the duration of the process.

An Alternative Storage Solution

Liberal return policies paired with consumer demand for quick delivery means many retailers are on the hunt for more storage space. However, purchasing or leasing additional warehouse space is difficult and often impossible for many companies.

According to CBRE, the amount of available warehouse and logistics space in the United States has fallen to its lowest level since 2000. With only seven percent of space remaining, the fourth quarter of 2018 marked the 34th consecutive year of declining industrial real estate availability.

In addition to shrinking space, warehouse rents have increased nearly 20 percent since 2015, imposing a significant hurdle for retailers with already-thin margins. Some of the squeeze can be attributed to ecommerce. As shoppers and companies alike vacate malls, retailers are no longer using the backroom space that comes with their storefronts. Instead, the majority of their inventory is sitting in warehouses.

MW&S is a real-estate alternative that provides much-needed storage space as well as the time and flexibility to ensure a smooth reverse logistics process, strategically moving goods back through the supply chain. As a warehouse on wheels, these temporary trailers can be used for years, allowing companies to scale their space based on demand. MW&S is also cost-effective, particularly when compared with renting or leasing brick-and-mortar warehouse space. A trailer typically costs around $150 per month, or $0.38 per square foot, compared to the average warehouse cost of $7.50 per square foot. MW&S also does not require any kind of lease commitment, enabling companies to pivot processes and strategies as needed.

Retailers can use MW&S to store their products during the time-consuming sorting process as they decide whether to put items back on the shelf or sell them to a secondary market. When products cannot be resold, companies must consider sustainability—they can trash or recycle them, comparing the cost of disposal to the benefit of improved public perception. What’s more, the price of gathering and sorting returned goods—especially for low-value products—may outweigh any potential profit recovery. By offering inexpensive flex space that can be used to store products that can eventually be recycled or disposed of in a responsible manner, MW&S can save retailers money and provide them with a more environmentally friendly option.

A comprehensive reverse logistics supply chain for e-tailers can also help companies meet consumer expectations of a quick, clear and easy return policy. Having the space to store products waiting to be sorted, re-stocked or recycled allows for a proper understanding of return rates among products as well, assisting in the overall recovery effort and subsequently increasing revenue.

Some companies even use MW&S to stage sales of large items. This year, a national furniture manufacturer used Milestone trailers for a nationwide mattress sale. The trailers both facilitated storage of the large mattresses and enabled speedy shipping, permitting consumers to have them at their doorsteps within days.

Room for Innovation

As an emerging logistics option, MW&S is continually improving. Companies, including Milestone, are adding cutting-edge technology to trailers to help clients understand what products are occupying the space, how much capacity remains, and other metrics to help them strategically manage the items on the trailers.

The world of e-commerce is quickly changing the outbound and inbound supply chain, and many companies struggle to keep up, let alone take the time to effectively revamp processes to meet evolving needs. MW&S represents a pause button, letting companies take care of immediate needs while giving them capacity for supply chain innovation.

---

Sarah Johnson
Sarah Johnson is executive vice president of mobile warehousing and storage at Milestone Equipment Holdings, one of the largest and fastest growing transportation equipment lessors in the United States, operating a diversified fleet of about 85,000 pieces of equipment, which includes a trailer fleet of approximately 60,000.