Inside retail supply chains

As Amazon marks two decades since the launch of its Prime membership, the company says it reached the “fastest speeds ever” last year, delivering globally “more than 9 billion items the same day or next day.”

In the U.S., Prime members saved more than $500 on average on delivery fees in 2024, which works out to nearly four times the cost of an annual membership, according to Amazon. Prime costs about $180 per year if paid in monthly installments or about $140 if paid annually.

“I do believe it is a fact that Amazon's delivery speeds are increasing, but so is the cost of Prime,” Rick Watson, founder and CEO of RMW Commerce, said by email, adding that the company is keen on reminding its Prime customers of the value of their membership.

The e-commerce giant in recent years has beefed up its fulfillment network. In 2023, its worldwide shipping costs rose over 7%, approaching $90 billion. Much of that investment has gone toward Amazon’s effort to speed up delivery times for its U.S. Prime members. Last year, the company expanded its number of same-day delivery sites by more than 60% and now serves more than 140 metro areas. 

Amazon has also pulled out of some areas. Washington, D.C.’s attorney general office sued the e-commerce giant, saying it “deliberately — and secretly — stopped providing its fastest delivery service to the nearly 50,000 Prime members who live in historically underserved communities east of the Anacostia River,” in violation of the city’s Consumer Protection Procedures Act. Amazon refuted that, saying that it adjusted delivery routes and times to protect drivers and that it is always transparent about delivery times.

More broadly, Amazon these days seems to be prioritizing AI over its sellers and retail business, even as competition is rising, according to Watson.

“What Amazon really needs to worry about long term is the growth of its marketplace itself,” he said. “In this new world, Walmart is growing much faster than Amazon and has the resources and scale to compete with it.”

Macy’s three-point transformation plan to combat sliding market share — dubbed the “Bold New Chapter” — will rely heavily on its supply chain.

The retailer plans to close distribution centers, increase automation, and implement other tactics that help the corporation improve inventory, productivity, and, ultimately, sales, the corporation's CFO and COO, Adrian Mitchell, said in a Q4 earnings call.

Altogether, supply chain efforts should result in $100 million in cost savings in the current fiscal year, eventually rising to annual run-rate savings of some $235 million by 2026, Mitchell added.

"Across the organization, Macy’s, Inc. plans to align operations to anticipated future omni-demand and deliver a more efficient operating model that will allow the organization to better serve customers," the company said in a press release about the new strategic priorities.

The initiatives come after Macy's reported a $71 million net loss in the most recent quarter. In addition to supply chain efforts, its three-point plan also involves closing some Macy’s stores and investing in the company’s luxury offerings.

They also follow the departure of Macy’s first-ever chief supply chain officer, Dennis Mullahy. The leadership change was a critical moment for the company’s operations: After Mullahy left in July 2023, Macy’s decided not to maintain a CSCO title. Instead, it opted to have its supply chain executives report to Mitchell — who is leading the end-to-end operations initiatives.

Under Mullahy, Macy’s built up infrastructure to bolster omnichannel, including in-store fulfillment. Now, the retailer is pursuing a “right-sized distribution center network,” as Mitchell said on the earnings call.

In doing so, CEO and Chair-elect Tony Spring told investors the retailer plans to monetize $600 million to $750 million of assets, primarily related to the closures of stores and certain distribution centers.

At the same time, the company is already implementing more automation across the Macy’s Inc. portfolio. It is consolidating its vendor base to decrease dependence on expensive digital tools, moving most of its applications from on-premise to the cloud, and building artificial intelligence and other data capabilities for inventory allocation, forecasting, pricing and other functions.

“The inventory planning and allocation changes underway should help improve how we flow products from vendors to customers. They should provide quick replenishment in stores and fulfillment centers, reduce split shipments and lead to higher in stocks, particularly for best-selling items,” Mitchell said.

Macy’s isn’t the only retailer streamlining its supply chain operations in the name of efficiency. Walmart offloaded its intermodal assets to J.B. Hunt Transport Services, likely to reduce costs associated with owning a private fleet. Meanwhile, Wayfair is planning to roll out consolidated delivery options, which will help cut shipping costs.

“A modern operation is our objective throughout the company, aligning to the anticipated future omni demand provides synergistic cost savings and allows us to improve our ways of working,” Spring said.

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By Blue Yonder

Many retailers are witnessing a surge in point solutions that promise to address the challenges associated with inventory planning. While these tools enhance efficiency for individual teams, they often perpetuate silos that undermine true supply chain optimization.

The result?  Departments are cutting themselves off from one another and stifling collaboration — sometimes inadvertently exacerbating the supply chain delays they intended to resolve.

To break free from these limitations, retailers must unify their planning departments within a single system to fully optimize the supply chain in the face of an increasingly disruptive market.

3 challenges currently facing supply chain planning

1. Organizational siloes still exist, and they’re holding you back.

In many planning organizations, siloes are alive and well. While using point solutions may seem efficient for individual departments who are purchasing the “best fit” for their needs, the reality is that this approach creates an environment where certain replenishment methods are not available where they might make sense — ultimately reinforcing the disconnect between departments and causing inefficiencies in the supply chain.

The result is an uneven patchwork of solutions that dampens optimization and complicates decision-making. To unlock true efficiency, planning teams must adopt a unified platform that considers the assortment in its entirety — whether it’s bananas or sweaters — while using the ideal replenishment methods for each product according to its characteristics.

2. The rising tide of disruptions.

The volume and complexity of disruptions in retail are climbing, and planners are bearing the brunt of the fallout. Day-to-day exceptions dominate their workflows — requiring manual intervention for even the top-selling items. The result is tunnel vision only made narrower by a lack of universal visibility across the supply chain. Instead of focusing on higher-value tasks that drive profit and organizational efficiency, planners are often driven to distraction addressing issues that have landed on their desks without notice.

3. Automation: the final frontier of enhanced inventory planning.

Rapid advancements have been made in planning technology, but the speed at which technology has developed may cause some users to hesitate before trusting it entirely.

Unfortunately, this history of mistrust corners planners into a cycle of manual management, leaving them stressed and overwhelmed. Ironically, planners end up manually managing everything, every day, to sidestep the very automation tools that were designed to make their jobs easier.

Nevertheless, the right system enables planners to focus on strategic activities rather than getting bogged down in minutiae by offering robust automation capabilities.

Ideally, planners should think of automation as a tool used to tell the system where to go, and let it optimize the route. This model produces the following outcomes:

• Users become decision-makers who focus on areas in which the system has not yet been or cannot be trained
• Stress levels drop as repetitive manual work decreases
• The organization benefits from higher efficiency and better results overall

By embracing automation and integrated planning, retailers can break down the barriers that hinder their ability to pivot quickly in response to market fluctuations.

The solution: unite planning under one platform

Ultimately, retailers have two choices:

• Let each department continue buying point solutions that work for them, furthering fragmentation and increasing complexity, OR
• Invest in an integrated platform that seamlessly aligns all planning functions, enabling interdepartmental collaboration and holistic optimization.

Move seamlessly between replenishment and allocation with an integrated platform.

Replenishment and allocation should no longer be viewed as separate functions. Contemporary inventory planning frameworks enable organizations to push inventory and clear distribution centers (DCs) based on data-informed strategies. Whether it’s preparing for a new season or managing promotional stock, inventory movement becomes smooth sailing.

Manage all products together.

The days of managing bananas and sweaters in distinct systems are over. A unified platform allows planners to handle diverse assortments with replenishment methods tailored to product characteristics. This approach ensures that each item is managed optimally while implementing a cohesive, unified strategy across the entire organization.

Align inventory planning to business outcomes.

Stop wasting time and energy micromanaging suggested order quantities and start focusing on aligning inventory strategies with overarching business goals. By leveraging scenario planning, organizations can easily visualize a network-wide ripple effect, reducing tunnel vision and improving decision making across departments.

Connect your allocation and replenishment operations across all departments

The singular goal of inventory planning is to move inventory in a mutually beneficial way for the business, the customer and the product itself. To achieve this, organizations must abandon the fragmented systems that continue to bog down planning departments while promising to relieve them of inefficiencies.

With Blue Yonder Allocation and Replenishment, organizations can:

• Connect planning across all departments
• Ensure unified visibility from one end of the supply chain to the other
• Optimize inventory movement
• Reduce stress on inventory planners by leveraging the power of robust automation capabilities

Don’t let fragmented systems hold you back. Contact a Blue Yonder expert today to unlock the full potential of your inventory planning.

When Ulta Beauty began its current supply chain transformation journey in 2021, it wanted to do things differently than its competitors.

Other retailers often build large facilities that may go underutilized throughout the year, but Ulta made a deliberate choice to keep a smaller footprint, Chief Supply Chain Officer Erik Lopez said in an interview.

“We took a differentiated approach to say, you know what, we don't want to just build a one-size-fits-all to the network because you know we have growth, but our growth is not just going to be vertical,” Lopez said. “We have a staggered approach and we wanted to have an MFC [market fulfillment center] model.”

Once complete, the model will consist of four regional distribution centers, three market fulfillment centers and one “fast” fulfillment center.

“The beauty of the MFC model is it's faster to build, it gets closer, again keeps all of inventory under one roof and we can do it at an easier clip than doing these bigger buildings that involve a lot more capital,” Lopez said.

Regional distribution centers undergo retrofitting

Ulta currently operates three regional distribution centers located in Dallas; Fresno, California; and Greenwood, Indiana. The company will also start construction of a fourth location in 2026 in Chambersburg, Pennsylvania, Lopez said.

To better optimize its regional distribution footprint for an MFC model, the company plans to add new facilities to its network while retrofitting other locations with upgraded automation technology.

The company completed a technology retrofit at its Greenwood facility last year, adding automated receiving systems and residual shuttles, among other upgrades. Next year, it plans to finish a retrofit of its Dallas distribution center by adding similar automation technology, as well as warehouse execution software, Lopez said. The company expects to eventually streamline to a single consistent operating model as it retrofits its other distribution centers.

Lopez said the warehouse execution software will act like “the brains of [Ulta] facilities and controls the flow of goods through its facilities,” Lopez said.

The decision to retrofit facilities wasn’t due to previously used automation technology being substandard, Lopez said. Instead, the company considered the needs of its employees to find ways to provide them with opportunities to upgrade their skills while making processes more efficient.

What Ulta tried to do with the new automation is focus on reducing steps, reducing waste and being less labor intensive, according to Lopez.

Ulta’s ERP connection to market fulfillment centers

In addition to its supply chain transformation, Ulta is also undergoing what it calls Project SOAR, which stands for Strength, Optimize, Accelerate and Renew. The project is a businesswide enterprise resource planning upgrade intended to accelerate and renew its core operations. While supply chain isn’t the main focus of the project, the company is still seeing benefits on that side of the business as a result of the upgrade, Lopez said.

More specifically, the upgrade has helped unlock the foundation of its market fulfillment centers called cross-docking capabilities.

Cross docking allows for minimal or no storage in between loading and transporting an item. For example, products are inventoried and shipped from an inbound origin and directly loaded onto outbound transportation, Lopez said. This allows Ulta products to move from a regional facility to an MFC directly to stores.

“Without the cross-dock functionality, we wouldn't be able to open up the market fulfillment centers and we would be stuck with the one-size distribution center model,” Lopez said.

Compared with its regional distribution centers, which average 650,000 square feet in size, Ulta’s market fulfillment centers are smaller, measuring about 300,000 square feet on average, according to Lopez.

The market fulfillment centers can serve up to 120 stores and 25,000 e-commerce orders per day, Lopez said. They also have a limited assortment of products made up of what the company classifies as its highest moving inventory.

Each facility is equipped with automation technology, including Very Narrow Aisle Pallet Racking, or VNA, which allows for tighter aisles to help gain more capacity. Ulta also uses wire guided routes in these facilities, meaning associates don’t need to train to drive equipment.

“They can just hop in equipment and that wire guided system actually does all the work for them … It's easier to train, easier to onboard and it helps our associates be more efficient,” Lopez said.

Ulta currently has two market fulfillment centers located in Greer, South Carolina, and Bolingbrook, Illinois. In 2026, the company will start construction on a similar facility based in the Pacific Northwest that is expected to open in 2027, Lopez said.

A fast fulfillment center for speedy e-commerce

The third element of Ulta’s microfulfillment model is its “fast” fulfillment center in Jacksonville, Florida.

The center, which only handles e-commerce orders, strengthens Ulta’s ship-from-store method, Lopez said. Initiated in 2019 with a five-store testing phase, Ulta’s ship-from-store program now encompasses more than 500 stores.

In 2018, a fast fulfillment center was expected to be able to fill up to 30,000 orders per day during peak times, increasing Ulta’s network capacity and progressing toward its goal of two-day e-commerce shipping by 2021, former CEO Mary Dillon said during a Q4 2018 earnings call. Today, the facility can serve up to 25,000 orders per day.

Besides wanting things fast, Ulta’s customers want options, Lopez said, particularly when it comes to delivery modes.

The work is all part of the company’s journey to omnichannel fulfillment, which allows it to provide variety to customers, whether that’s to buy online and pick up in store or receive same-day delivery through DoorDash.

Ulta is still in the midst of its supply chain transformation, but it is "constantly looking at ways to evolve and improve our supply chain operations to meet the needs of our guests," Lopez said.

La-Z-Boy is consolidating its cut and sew operations in Mexico to optimize costs, President and CEO Melinda Whittington said in an August earnings call.

The furniture maker said in a recent securities filing that it would permanently close its leased cut and sew facility in Parras, Mexico, by the end of Q1 of fiscal year 2025, which ended July 27.

The furniture maker is also shifting upholstery production from Ramos, Mexico, to its other upholstery plants. Products will return to Ramos to be cut and sewn, per the filing.

The focus on plant efficiencies in Mexico is part of La-Z-Boy’s larger strategy to build a more dynamic supply chain, according to Whittington. She added that the furniture maker considers its North American manufacturing footprint as a “key differentiator” for production.

“As we mentioned in last quarter's call, we are prudently managing the consolidation of our cut and sew operations in Mexico to optimize costs, while ensuring no service disruptions,” the CEO told analysts. However, there have been some delays related to the work La-Z-Boy is doing in Mexico, particularly when it comes to securing labor from a quality and productivity perspective, SVP and CFO Bob Lucian said during the call.

More than half of the company’s cover materials are purchased from suppliers in countries like China and the U.S., before being cut and sewn in its Mexico facilities, according to the securities filing. As of April 27, La-Z-Boy operates four facilities in Mexico to support its “speed-to-market and customization strategy.”

La-Z-Boy has also looked to optimize staffing levels across the company’s Mexico operations. The furniture maker's number of full-time equivalent employees dropped from 10,500 at the end of fiscal year 2023 to 10,200 the following year, per the filing.

The consolidation comes after active efforts to build its production network in Mexico. In 2022, La-Z-boy expanded its North America operations with several new factories in the country after having to make structural changes to its supply chain to shorten lead times and tackle backlog. At the time, the furniture maker had opened at least two leased manufacturing plants in Mexico.

Best Buy customers can now access live tracking of product deliveries and in-home installation services. The new features are enabled by AI technology, the consumer electronics retailer said in a Thursday news release.

The tracking feature is available for large items, like big-screen TVs and refrigerators. On the day of a delivery, once a driver begins their route, the app will use real-time traffic data to provide views of drivers along their delivery route.

When a customer’s house is next on the list for a delivery or installation, Best Buy says the tracking map will zoom into a street-level view, providing an up-to-the-minute estimated time of arrival. The app will send a notification just before the driver arrives.

Best Buy is among a growing list of retailers — Amazon and Walmart among them — that are using AI in some capacity to enhance the customer-facing side of the shopping experience. 

“Our new live-delivery tracking experience removes the frustration so many of us have felt when we’re given a window of time to wait around at home for an appointment or a larger delivery to arrive,” Brian Tilzer, the company’s chief digital, analytics and technology officer, said in a statement. “We know our customers’ time is extremely valuable, and we’re proud to bring a level of convenience to technology delivery and installation that nobody is currently providing.”

Best Buy joins other retailers, like Target, that are also putting AI tech into employees’ hands to enhance customer support or supply chain operations. In April, the company announced a partnership with Google Cloud to introduce an AI-powered virtual assistant this summer. 

The tool will allow customers to troubleshoot product issues, manage deliveries and manage their Best Buy memberships. AI will also be used to give customer service agents real-time recommendations. In May, Best Buy said it was updating its mobile app to offer more personalization, including personalized video content. 

And as part of a brand refresh announced in July, the retailer also leaned into personalization features. The initiative includes more in-store experiential spaces and a new hologram spokesperson. The company also plans to add more in-store staff in its computer, appliance and home theater departments.

Consumer electronics sales rose 7.2% in July after months of softness, the U.S. Commerce Department reported Thursday. Best Buy has felt the impacts of that softness. “I think we're just seeing a little bit more trade down, a little bit more purchasing for duress, and certainly much more value hunting,” CEO Corie Barry said during a June investors’ conference.

“So I think you're just continuing to see a consumer that slowly, way more slowly than any of us expected, continues to pull back and make very explicit decisions based on value and perceived value of whatever the items are that they're looking for,” Barry said.

Hasbro has made efforts to improve its end-to-end planning capabilities, bringing aged inventory down to “historic lows,” EVP and CFO Gina Goetter said during a Q2 2024 earnings call.

The EVP noted the toy and game company’s upgraded planning proficiencies have helped it better determine where to source inventory according to customer demand.

Despite shrinking its product backlog, Hasbro will ensure “suitable inventory levels to support sell-through for the holidays,” according to Goetter.

Hasbro has been undergoing a supply chain transformation recently, with Goetter crediting its “major wins” in Q2 2024 in part to Stephanie Beal, who was promoted to chief supply chain officer in July.

The toy and game company did not go into details regarding its end-to-end planning improvement and did not respond to a request for comment by the time of publication. However, during a Q1 2024 earnings call, Goetter said that Hasbro implemented a major inventory overhaul last year that benefited the company during Q4 2023.

“Also, within our supply chain, we are building new capabilities within planning and forecasting to ensure that inventory levels, both owned and retail, remain within the desired threshold,” Goetter said during a Q4 2023 earnings call. “We made significant progress coming out of 2023 and these updated processes and tools will ensure that we maintain a healthy inventory position”

The toy and game company focused on reducing logistics costs last year, Goetter told analysts during a Q3 2023 earnings call. She added that this year Hasbro planned to target procurement and manufacturing.

To reduce complexity, Hasbro is focusing on efficient SKUs and reducing costs during product design to generate savings and improve the profitability of its toy business, Goetter said in Q3.

For example, Hasbro planned to release a lower cost version of Jenga, based on a “fresh design for cost model,” which the company is replicating throughout its production line, CEO Chris Cocks said.

In Q3 2023, Cocks said that Hasbro’s supply chain alone was driving roughly $100 million of the year’s expected savings, with logistics and production costs down to the mid-single digits.

“Our revamped supply chain is helping us get smarter on inventory management,” the CEO said at the time.

As a retailer with a more than 120-year history, J.C. Penney has navigated plenty of shifts in the retail space.

Today, the department store chain is focused on protecting its future since emerging from bankruptcy under new ownership in 2020. It's in the midst of a plan to invest more than $1 billion into its business.

One of the central pillars of the retailer’s long-term improvement strategy is implementing more advanced technology, including artificial intelligence and machine learning, into its supply chain operations.

Chief Information Officer Sharmeelee Bala, who joined J.C. Penney in January 2022, has been a key leader behind the company’s technology upgrade strategy, noting that such initiatives are now being looked at as enablers for the company rather than afterthoughts.

“J.C. Penney has been very strategic in ways to invest and how to invest and prioritize the investments in technology, especially,” Bala told sister publication Supply Chain Dive in an interview. She added that the company is focused on improving customer and employee experience through its technology investments.

On the customer side, Bala says J.C. Penney has begun implementing newer tools, some homegrown and others from third parties, across pricing and assortment planning, among other functions.

“We’ve also got investments where we decide the node from where we send, whether it was shipped from store or do we need to send it from a distribution center or a fulfillment center, which is closer to our customer, so that they can get it faster,” Bala said.

At the distribution center level, J.C. Penney has turned to new warehouse management systems and automation technology to improve operations. For example, the retailer installed SDI Element Logic’s Joey Pouch sorting system at a facility in Reno, Nevada, in an effort to improve inventory management and purchase delivery times.

Bala said the turn to automation is meant to eliminate an overabundance of time-consuming manual processes and handoffs that were prone to error. She added that automation technology is meant to help augment employees’ work to make their jobs easier.

“Like induction and picking and everything is much more modern and automated. You still have people doing it,” Bala said. “You still have somebody who is having to connect the dots, but it takes that manual handoff out of the picture, and it takes time out of the picture.”

Since implementing automation technology at the Reno distribution center, Bala said speed and productivity have improved at the facility, as has the time it takes to deliver to customers.

Distribution center upgrades are just part of the equation for Bala, who said one of her key challenges is upgrading a massive legacy supply chain made up of multiple systems that perform similar functions.

“I do have infrastructure that is great and stable, but they are pretty old,” Bala said. “So how do I modernize [and] at the same time invest in a way that when I modernize it, I’m also getting efficiency and not just focus on modernizing?”

Although Bala says J.C. Penney is not going after “every shiny object” available, the retailer is prioritizing AI and machine learning-enabled technology. To ensure the success of such systems, Bala has prioritized building up the retailer’s enterprise data platform. Much of that work involves consolidating and cleaning data from across the business to ensure every department is speaking the same language and working together, according to Bala. 

Beyond implementing improved data hygiene practices, Bala and her team are also building a data platform that can adjust as new information comes in, allowing AI models to become more effective and provide the benefits the company needs to compete in an increasingly competitive retail arena.

“When I look at the total cost to serve, because that’s something that as a CIO, I have to keep looking at my ecosystem and say, ‘How do I make it more efficient for me to serve my business partner?’” Bala said. “How do I look at it as ensuring that we are building for the future and not just for today?”

Retailers’ ability to offer customers many happy returns is becoming more difficult and costly.

Total returns in retail amounted to $743 billion in 2023, according to a report from the National Retail Federation. That equates to $145 million in merchandise returns for every $1 billion in sales. This year, shoppers are expected to return $890 billion in merchandise, which represents nearly 17% of retailers’ annual sales, according to a recent NRF report.

Faced with the escalating challenge of returns, retailers are taking diverging approaches to dealing with the issue. And while not all returns involve fraud, that is one of the issues retailers are addressing. Most of the retailers surveyed in the NRF’s latest report said return-related fraud and other exploitative behavior was an issue for their business. 

“The rise in e-commerce shopping has led to an increase in return rates and volumes across most categories because online shoppers can’t touch and feel products before they buy,” David Morin, vice president of customer strategy at returns company Narvar, said via email. “The notion that ‘the living room is the new fitting room,’ where consumers try items at home before deciding whether to keep them, has led retailers and brands to review their return programs, including tightening their return policies.”

Buying multiple items with the intent to return some of them, also known as bracketing, has grown among younger people, the NRF found, with 51% of Generation Z consumers acknowledging they’ve done it. 

Morin said Narvar’s research has found rising rates of what it terms “friendly fraud” — behaviors like bracketing or wardrobing, where someone buys and wears an item with the intention of returning it. But Narvar also found rising rates of potentially criminal return policy abuse.

“The increase in fraud, along with the heavy incurred costs to retailers, is driving a larger focus on strategies that identify potential fraudsters and create unique workflows to deter the behavior,” Morin said. “Retailers are also balancing out strategies that still reward trusted customers to maintain the sense of ‘peace of mind’ that is critical in returns.”

Indeed, a return abuse or fraud crackdown must be balanced with maintaining customer experience, Katherine Cullen, the NRF’s vice president of industry and consumer insights, said in the organization’s latest report. Other experts echoed that perspective.

“Although Amazon, REI and Target and others have tightened their return policies this quarter to ‘combat fraud,’ the Gen Z and Alpha customers still expect to have a satisfactory and easy ability to return unwanted items in an efficient manner whenever they please,” Shawn Grain Carter, a retail industry consultant and professor at the Fashion Institute of Technology at the State University of New York, told Retail Dive in an email. “This is part of their seamless retail shopping experience of which they have grown accustomed.”

Who gets hit the hardest by returns? 

Some categories in particular are more vulnerable to returns. For example, several analysts told Retail Dive that apparel makes up the majority of retail returns.

“This is for multiple reasons,” Neil Saunders, managing director of GlobalData, told Retail Dive in an email. “Sizing is a major issue, especially if buying online, and many consumers will buy multiple sizes and return the ones that don’t fit. How things look in person is important in apparel, and this is another factor driving returns.”

Returns also peak during certain time periods. Besides the holiday season, Saunders said returns typically surge after big promotional periods, like Amazon’s Prime Day. Apparel also follows seasonal trends, which may drive upticks in returns as consumers buy new outfits for the changing seasons, Saunders said. 

Additionally, the prevalence of online apparel shopping and an inability to try on items before buying contributes to high return rates in the category, as do consumers’ expectations on issues like fit, color and fabric, Jonathan Zhang, a professor at Colorado State University’s College of Business, told Retail Dive in an email. 

And for the same reasons — look and feel — Zhang said home goods, like furniture and decor, also have high returns. “Items in this category are often returned due to damage during shipping, mismatched expectations about size or color, or changes in customer decisions after seeing the product in their home environment.”

Services like Stitch Fix that allow shoppers to try on apparel at home before purchasing came about to help solve this problem. Yet many such offerings have shuttered in recent years. Amazon also recently made a major change involving its own apparel try-on service. The retailer plans to phase out its Try Before You Buy service. The program allowed Prime members a seven-day trial of select apparel, shoes and accessories. Amazon said it’s ending the service as an increasing number of customers turn to AI-powered features like virtual try-on as they shop for apparel.

Regardless of the driving factors for returns, the rising tide of returned merchandise also poses a sustainability issue for retailers. More than 11% of the $100 billion worth of purchased apparel that’s returned to retailers eventually ends up in a landfill, according to research by Equal Ventures, a venture capital firm.

“Consumers are increasingly aware of the environmental impact of returns, such as waste from disposed products and emissions from reverse logistics," Zhang said. “Retailers are under pressure to address these concerns, either by encouraging exchanges over returns or by implementing fees to disincentivize habitual returning behaviors.”

How are retailers responding?

During the last couple of years, retailers across the industry have made some noteworthy return policy changes. A key driving factor, according to industry experts and retailers themselves, is the escalating cost and volume of handling returned merchandise.

Last year Morin said Narvar saw about 25% more retailers charging for return shipping. Many others shortened their return windows, especially retailers that had policies longer than 30 days. 

“Rising return costs and fraud are pushing retailers to overhaul their policies,” Zak Stambor, a senior analyst for retail and e-commerce at Emarketer, said in an email to Retail Dive. “While many have rolled back free returns, others are taking more targeted steps to cut costs and curb abuse.” Stambor added that the nuanced approaches retailers are employing “reflect the growing pressure on retailers to balance customer satisfaction with operational efficiency.”

Here’s a snapshot of some of the changes retailers recently made to their return policies: 

• Walmart said it has increased return shipping rates for its third-party sellers. Additionally, the retailer said its Walmart Marketplace sellers can allow customers to keep items and receive a refund, thus avoiding the need to pay for return shipping.
• Amazon said sellers using its fulfillment services can now issue product refunds without requiring customers to return the item. The move avoids sellers having to pay for the reverse logistics of accepting returned merchandise.
• Kohl’s began accepting Amazon returns at all of its locations in 2019. Last year, the department store chain added an additional return service in partnership with Narvar and Inmar Post-Purchase Solutions, which allows customers to return items from several brands to Kohl’s stores, including Carhartt, Hanes and Levi’s.
• REI said in November that it is now declining returns from a “small subset” of its members. These individuals have repeatedly abused REI’s policy, the company told Retail Dive in a statement. The people in question represented less than 0.02% of REI’s 24 million members but had an average return rate of 79%.

Data analytics advancements are now enabling retailers to identify and address return patterns among specific customer segments. Zhang said advancements in data collection make personalized return policies a possibility in the near future, although he cautioned the data should be handled carefully and decisions should be based on actual behavior to avoid any perception of preemptive discrimination.

Morin said another significant factor is that regulations on handling consumer data are becoming stricter. That’s making first-party customer loyalty program and membership data more valuable — and more costly to acquire.

“Loyalty and membership programs are some of the most valuable sources of first-party data for merchants, but consumers, especially younger generations, are increasingly mindful about sharing their data and may only be willing to provide personal information if they perceive the value exchange is equal.” 

Morin said some retailers are launching more incentive-based loyalty and membership programs with built-in returns benefits such as free shipping in response to concerns about data privacy. Better logistics and automation could also make the retail returns process faster, more seamless and more consumer-friendly by the end of this year, the NRF forecast in its report.

Saunders said a leading factor that’s likely to shape future return policies are changes in the cost and volume of returns, along with how rival retailers are responding. “The aim of any retailer is to reduce returns, but this must be balanced against protecting sales,” Saunders said. “Return policies that are too onerous can cost retailers sales.”

Mattress maker Purple Innovation realized a “significant breakthrough” in Q2 2024 gross margin from multiple supply chain improvement initiatives, COO Eric Haynor said on an Aug. 9 earnings call.

The company’s efforts have included diversifying its supplier base, optimizing its logistics network, implementing a systematic planning capability and improving manufacturing efficiency.

Focusing on improving the company’s gross margin has been a priority for Purple’s supply chain management team, Haynor told sister publication Supply Chain Dive in an interview. The mattress maker has been pulling out of a financial slump this year, with net revenue up 2% year over year in Q2 while its gross margin rose to 40.7%, up from 30.1% in Q2 2023.

Diversifying the supplier base

Purple started accelerating its supplier diversity efforts last year, shifting from a sole supplier model for materials such as the chemicals used in the manufacturing of its GelFlex Grid.

Purple analyzed what Haynor calls “the should cost” by asking determining the proper price for materials based on marketplace metrics such as commodity indexes. This was particularly critical when evaluating chemical suppliers, as Haynor’s team noticed chemical commodity indexes were going down but supplier costs were not.

When the company evaluates quotes from suppliers for its manufacturing chemicals and other materials, it also makes sure to assess each potential candidate’s qualifications and product quality, according to Haynor.

“The primary thing is, you need to make sure you have competition battling for your business, and that comes down to having more than one supplier for the items,” Haynor said, noting that having a more diverse supplier base has also helped Purple improve its resilience.

Altering its supplier base has not had a negative impact on Purple’s supplier relationships, Haynor said, noting that there are some forms of contractual relationships in place wherein the company makes volume assurances.

“So I haven't found any problems in having those discussions. And usually suppliers are happy to fight for the business, earn the business, and they're really happy when they win it,” Haynor said.

Purple has also evaluated its internal capabilities through a “make versus buy analysis,” Haynor said. This process has led the company to vertically integrate and bring sourcing for pillow assemblies in-house, for example.

“We're not asking our suppliers to lower their price; we're changing the supply chain to take cost out,” Haynor said.

Purple is still working on supplier diversification and expects its efforts to deliver further savings later this year, Haynor said on the Q2 earnings call.

Even as it benefits from reducing its reliance on single suppliers, Purple is still finding the right balance in its production footprint. The company announced plans to close two manufacturing facilities by Q1 2025 in August. Despite the closures, Haynor said the company’s deployment of lean manufacturing across the organization has driven efficiency improvements.

Fill the truck

Optimizing its logistics network has been an exercise in simplification for Purple, according to Haynor.

“Where you save money in logistics is by filling up the truck and driving less miles,” Haynor said.

To cut costs and mileage, Purple introduced what it calls its scheduled delivery program. Instead of shipping individual orders via an less-than-truckload carrier, the company now takes multiple orders and combines them into a single trip with multiple stops.

Haynor said the program “has been hugely successful,” adding that the company’s delivered in full on-time performance is now hovering near 95%.

Haynor also said that Purple has evaluated its partial network to improve shipping efficiency and reliability. For example, it may combine two sets of sheets into one box rather than shipping them separately.

Taking things a step further, Haynor said the mattress maker has changed its inbound network so that product coming from overseas goes straight to destination warehouses, which ship to customers directly.

“There's a ton of little pieces that you do with optimizing your logistics network to figure out what the best way to get to your customer at the lowest cost,” Haynor said.

Pushing planning performance

For years, Purple conducted its supply chain planning on disconnected spreadsheets, so what it bought didn’t always line up with what it expected to sell, according to Haynor.

To solve the issue, the company deployed material requirements planning (MRP) modules in its existing enterprise resource planning (ERP) system. The nine-month project required extensive data collection and testing, but now Haynor is more confident that the company’s forecasts translate into production and purchasing plans.

“It's been a big win for us,” Haynor said. “And this is the sort of thing that is transformational for a small company.”

Since the system was deployed in May, the company has reported lower inventory and higher levels of service, according to Haynor.

“The best part is, is that the team can now pull the levers,” Haynor said. “They can decide what their inventory is. Instead of the inventory being an outcome, what they did without information, they're setting parameters that allow us to determine what the outcome is.”

Walmart Canada announced it plans to invest 6.5 billion Canadian dollars (about $4.5 billion) into its store and supply chain footprint.

As part of the initiative, the retailer is planning to open dozens of stores across the country, starting with opening five supercenters in Ontario and Alberta by 2027, two of which are slated to open this year, according to a company announcement.

Walmart Canada is also planning to open a distribution center in Vaughan, Ontario, this spring.

The company’s investment is the largest of its kind since Walmart Canada began operations about 30 years ago, Guilherme Loureiro, regional CEO of Walmart Canada, Chile, Mexico and Central America, said in a statement.

Walmart Canada plans to open its Port Credit supercenter this summer. Another supercenter at Hopedale Mall is slated to open later this year. Three supercenters are slated to open in Calgary, Edmonton and Fort McMurray in Alberta by 2027. 

The investments will support the modernization and expansion of the company’s Canadian supply chain. Walmart Canada also announed that Canada Cartage has acquired the company’s fleet business. The company declined to disclose the financial terms of the deal.

The investment comes on the heels of several executive appointments at Walmart Canada, including Venessa Yates as CEO. Yates, who was appointed to the chief executive role, was previously senior vice president and general manager of the company’s Walmart+ membership program. She replaces Gonzalo Gebara, who is leaving the company late next month after 25 years for family reasons and to pursue other interests.

"The Canadian business, with its 100,000 associates and impressive 30-year history, has always been a source of pride," Yates said in a statement. "We're currently in growth mode and I'm excited about our future."

Additionally, Steve Schrobilgen was named Walmart Canada's chief operating officer. His responsibilities include oversight of supply chain and real estate. Schrobilgen’s prior position was senior vice president and business unit leader for Walmart in the Western U.S.

The announcement comes as Walmart Canada wraps up a prior 3.5 billion Canadian dollar investment, first announced in 2020. Under that initiative, the company said it updated more than 180 stores, added four stores in Victoria, British Columbia, and Montreal and relocated two stores in Edmonton and Vaughan, Ontario. 

Additionally, the company invested 800 million Canadian dollars to open a fulfillment center and three distribution centers, including the Vaughan location. The company also touted its 200 million Canadian dollar investment in pay increases for Walmart Canada’s frontline workers.