Inside the warehouse poised to process your unwanted gifts this holiday

MISSISSAUGA – When Santa hops off his sleigh, signalling the end to another Christmas Eve, a North Pole-esque operation at a warehouse in Mississauga, Ont., will just be amping up.

A cacophony of beeps will ring out across the facility as workers scan packages stuffed with unwanted items ranging from Skims body suits to ‘47 ball caps to True Classic T-shirts. They will scurry between shelves and metal cages overflowing with thousands more. Every time space appears, another delivery truck will arrive to make the scene even more frenetic.

But unlike Santa’s workshop, this operation won’t be pumping out gifts. It will be processing returns on behalf of retailers flooded with goods customers send back for refunds after the holiday season peaks.

“Right now, we start at 8 a.m. and go to 5 p.m., but we’re going to end up pushing it from 9 a.m. to 9 p.m. and it will go on like that until February,” said Ahmed Saeed, head of operations at ReturnBear, as he wandered its warehouse a few days after Black Friday.

The Canadian company — founded in 2021 as a way to accept returns from customers and prepare them for their next home — is a small but mighty cog in a “reverse logistics” market that research firm Grand View Horizon has valued at more than US$882 billion. It is estimated to exceed US$3 trillion by 2033.

The market has exploded in recent years because retailers like Amazon, Ikea and Costco have convinced shoppers to open up their wallets, especially online, by offering long return windows or loose policies.

Now, shoppers expect those policies everywhere and retailers are dealing with much more than clothing that didn’t fit or the odd item that broke during transport, said Elisa Swern, PwC Canada’s national consumer markets leader.

Many are also handling items people used once and then sent back or products someone ordered in several sizes or colours with the intention of returning whichever wasn’t flattering.

Parsing through it all is rarely quick or easy, especially when perishable, fragile, bulky or seasonal items are involved.

“Many of them end up in landfills, and many of them are just a nightmare to process,” said ReturnBear’s chief marketing officer Katherine Lehman.

Data she’s seen estimates every return costs a company $33, between the paperwork, processing, shipping and restocking.

“It’s a very expensive, but very, very, key part of the supply chain,” she said.

When items arrive at ReturnBear’s warehouses, every package gets opened to confirm the product is actually in the box. Most of the time it is, but in some instances, people keep the item and send in empty boxes or ones weighed down with rocks to try to dupe brands into giving them refunds. Other times, someone returns something like a set of sheets but leaves out the pillowcases in hopes no one will notice.

There are also instances where people are sending back several returns at once and affix the wrong label to the package ReturnBear gets or mistakenly leave other items in the box. The company has found everything from wallets, keys and phones to modems and lamps in boxes meant to contain clothing.

Once a worker has confirmed the return is what it’s supposed to be, they check the size against the original order and look for stains, rips and other damage. If any imperfections are found, many brands authorize ReturnBear to donate the items to local charities.

Flawless items are either returned to retailers, which put them back on store shelves or websites, or wait at the warehouse for a different customer to order them. In the latter case, ReturnBear runs a lint roller over them, repackages them and then ships them directly to the new buyer, skipping tariffs that could come from crossing the border again.

“Most companies (see returns as) the cost of doing business and they write it off as a loss,” Lehman said. “We turn it back into a profit for them because we allow them to reclaim and, in some cases, resell their own inventory faster.”

On an average day, the company’s Mississauga facility alone will process 300 returns.

While it has seen surges when Kim Kardashian drops new viral undergarments or when teams like the Toronto Blue Jays crash out of the playoffs and bandwagoners rush to return merchandise, the usual busy season follows the holidays. In January and February, ReturnBear’s five-warehouse network typically handles 1,200 items per day, though that number grows exponentially every year as new clients get onboarded.

While some of ReturnBear’s clients are massive brands, others are so small they may only get a handful of returns each week or month. By using ReturnBear, the price retailers pay for its services pales in comparison to the cost of having to run their own warehouse and they don’t have to resort to some of the other methods companies use to tackle returns.

Many brands skip the hassle — and cost — returns bring by selling them to liquidators, giving customers a refund and telling them to keep the item or throwing the merchandise out. Other brands simply make items final sale.

For companies that accept returns, as soon as a customer asks for a refund, the race is on, said Jenna Jacobson, director of the Retail Leadership Institute at Toronto Metropolitan University.

The longer it takes someone to return an item or a company to process it, the more likely it is to be out of season and thus, can’t be sold for full price, she said.

To tamp down on potential losses, businesses like Miniso Canada have shortened return windows to one week and retailers including Uniqlo, Zara and H&M have played with charging fees on some products people bring back.

Le Château and Ever New have also affixed tags to the outside of garments with a note saying if they’re removed, they can’t be brought back.

All these companies are trying to strike “a delicate balance,” said Jacobson.

“You don’t want to be the retailer that has very strict return policies, because, if you do, (shoppers) may not want to purchase from that store again,” she said.

While she expects companies to keep experimenting with how they can get us to send back fewer things and faster, she said the amounts of money loose return policies convince people to spend mean “returns are certainly not going anywhere.”

Saeed agrees — and the warehouse he oversees is proof.

When he started at ReturnBear in 2023, the company had a tiny Toronto office for administrative duties and returns. Now, it has facilities on the east and west coast of the U.S., in the EU and Australia and is eyeing neighbouring space in Mississauga to keep up with demand.