Consolidation Looms in Rapidly Growing Reverse Logistics Market

As the reverse logistics market expands, industry fragmentation leads to increased mergers and acquisitions.

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Consolidation Looms In Rapidly Growing Reverse Logistics Market

The reverse logistics sector, currently valued at over $860 billion in the B2C segment alone, is witnessing a remarkable phase of growth and transformation. With more than 5,000 companies operating in this space, the Reverse Logistics Association (RLA) points to a potential trend of consolidation in 2024. This comes amidst a backdrop where major tech firms like PayPal, Affirm, and Shopify have either divested or shut down their reverse logistics operations.

The industry’s expansion is starkly evident, with projections by Global Market Insights suggesting that the total reverse logistics market could exceed $1.6 trillion by 2032. Tony Sciarrotta, executive director of the RLA, highlights the industry’s fragmented nature as a significant challenge. The surge in e-commerce has led to an increase in online purchase returns, estimated at around 20%. Sciarrotta notes that B2C sales accounted for about 17% in 2022, a significant rise from 7-8% in 2016. This increase has naturally led to a higher volume of returns, with only about 50% of returned inventory making it back onto the shelves.

This fragmentation is driving mergers and acquisitions in the sector. Notably, UPS acquired Happy Returns from PayPal and added Optoro, an all-in-one returns platform, to its portfolio. Happy Returns is known for its “returns bars” that facilitate easy, unboxed returns for customers. Meanwhile, Affirm shuttered its Returnly operation, and Shopify sold Deliverr, previously acquired, to Flexport. Blue Yonder’s acquisition of Doddle and Accenture’s move to acquire OnProcess are further evidence of this consolidation trend.

The question arises: why is there so much movement in a market that is evidently on an upward trajectory and increasingly crucial in the customer journey? The answer may lie in the strategic realignment of companies to focus on core competencies and the attractiveness of reverse logistics as a high-growth area for companies looking to expand their service offerings. As the market matures, consolidation is likely to bring more streamlined operations and potentially more innovative solutions in the reverse logistics space, catering to the ever-growing demands of e-commerce and customer satisfaction.