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Brandon Isner is head of retail research for the Americas at CBRE. With more than 15 years in the real estate world, Isner is responsible for planning, coordinating, and executing research projects, and providing data support for CBRE operations.
His prime focus has been analysis on disruptive elements in commercial real estate and how they can be leveraged as a positive. In addition, he has authored several market reports on the rise of omnichannel retailing and how it relates to brick-and-mortar retail stores. He has presented thoughts on the commercial real estate market to groups such as the Greater Miami Chamber of Commerce, The Appraisal Institute, The Business Solutions Association, Rotary Club, BOMA, CREW, CUNA, the Downtown Cleveland Alliance, and the Downtown Akron Partnership, among others. Reports he has authored include “U.S. Development Opportunities 2021,” which compares and contrasts the top 50 markets in the U.S. for commercial real estate development, and “Capital, Companies, and People,” a narrative on the great migration to South Florida.
Prior to joining CBRE, Isner worked with Forest City Residential Management in leasing and property management. Previously, he was associated with several residential apartment brokerages in New York City, including Manhattan Apartments Inc. and Bond New York Real Estate.
A resident of Miami Beach, he earned a master’s degree of urban planning, design, and development from Cleveland State University in 2015. When he is not thinking about commercial real estate and the economy, he can often be found at karaoke venues in Miami and around the country.
David Maloney, Editorial Director, DC Velocity 00:01
Retailers deal with all those nasty holiday returns. The government releases a blueprint for decarbonizing transportation. And top tech trends for 2023.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Beckhoff. Have the entire digital fufillment center at your fingertips with automation by Beckhoff. It's digital transformation done right. For more information, please visit Beckhoff.com/intralogistics.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: the holiday season is over for another year and most of us have taken down the trees and put the lights away by now. But for retailers, there's still a lot to be done, including dealing with the many shopping returns they must now process. How are they handling them this year? To find out, here's Ben with today's guest.
Ben.
Ben Ames, Senior News Editor, DC Velocity 01:16
Thanks, Dave. Holiday traffic ticked up at brick-and-mortar stores this peak season, of course, despite those higher prices and tighter credit conditions across the economy, and that means that retailers are now confronting an increase in product returns. As we speak, some of those peak-season purchases are still trickling back to stores and websites, and that can cause some real financial pain. Here today to talk about trends and strategies with returns is Brandon Isner, who is America's head of retail research for CBRE, the big industrial real estate firm. Welcome, Brandon.
Brandon Isner, Americas Head of Retail Research, CBRE 01:52
Thank you very much for having me. Appreciate it.
Ben Ames, Senior News Editor, DC Velocity 01:55
First of all, let's look at the numbers. CBRE, in a recent report from you guys, quotes the reverse logistics company Optoro as predicting that some 135 billion dollars in goods will be returned — that's both online and in-store — in the U.S. between Thanksgiving and the end of January. So, we're not quite there, but through the end of the month. That's up 12 and a half percent from last year, so even though, of course, the American retail sector is enormous, those figures are really significant, right?
Brandon Isner, Americas Head of Retail Research, CBRE 02:26
They definitely are, and, you know, it's coined the term "reverse logistics," which is a whole entirely separate business; you're just geared around returns of retail goods. And, you know, I was reading, I've been reading some of the reports that have been coming out, and yeah, you're right. I think Salesforce predicted that 13% of online orders were returned, so it's definitely big business, and it's one of those businesses where you don't see a lot of it on the surface, but you know, under the surface of the water, the current is very rapid and very turbulent. and a lot of people are working in a lot of different places to get those returns back to where they need to be.
Ben Ames, Senior News Editor, DC Velocity 03:09
Righ. I like that image of the underwater flow that most people aren't aware of, and that kind of brings me to my next question, because, you know, when we talk about the dollar values involved here, like that, the big numbers we just mentioned, that represents just the sticker price on the goods, right? It doesn't include the entire cost of dealing with them from the retailer's point of view — the, you know, there's the shipping to send it back, the labor to deal with it, the real estate to have a place to put them all and sort them, and then truck them to another place when you're done. It just goes on and on, right?
Brandon Isner, Americas Head of Retail Research, CBRE 03:42
No, Ben, that's completely correct, and that's another thing where, when the item is returned, it's not like the retailer just gets that item back, and, you know, nothing's lost. My colleagues on on the industrial side have estimated that 66% of the value of that good comes back in regard to logistics cost and labor costs, and so it's definitely an expense. And so, when retailers deal with people that might order three or four things with the intent of returning three of them, all that adds up, and it's, you know, a lot of companies are coming to the reality that e-commerce is very expensive, and not just in fulfillment of orders, but in the return orders as well.
Ben Ames, Senior News Editor, DC Velocity 04:34
Yeah, no doubt. A lot of goods, of course, are returned to the retail stores where people personally bought them, physically, but a whole lot of others are mailed back to an e-commerce, you know, retail website, but of course you don't mail it to the website; it goes to a DC somewhere. So, do those two flows ever end up in the same warehouse, or are they completely independent streams, or how does that work?
Brandon Isner, Americas Head of Retail Research, CBRE 04:58
Yeah, there's a lot of different quarters, and you're correct. The first thing that you mentioned, it's kind of interesting, what we've been seeing. And, you know, we recently launched our Global Live-Work-Shop Report, and I was able to take from that, you know, some of the data. We did a survey of 20,000 people across the globe, and so I dove into the data that was U.S.-based, and there's some really interesting findings. You know, 54% of people prefer to return online orders in-store, and so that's, that can actually be a good thing. It might make it more complicated to get those items back to the warehouse, but it's yet another channel that that can accept returns, and it allows the retailer to re-establish a relationship with that customer, maybe even lead to an additional sale, not just the return. And so, you're you're dealing with that, also, it's really kind of an interesting brew, because stores are going to have to start thinking about their — so they have so much space within the store, but in the long past, that space was dedicated to selling and then, you know, backroom space. But now, there's a lot of heightened interest in having better space for returns and just to be able to handle that and to not affect the rest of business going forward, and to have someone there that can establish a — re-establish the relationship with the customer. So, there's a lot changing, you know.But you're right, it's, you know, talking about that turbulence, there's there's a lot of ways that things get back. Some companies have third-party logistics companies handle that for them, so it's — yeah, there's a lot of different channels on how that all happens.
Ben Ames, Senior News Editor, DC Velocity 06:58
Really interesting stuff. And speaking of that relationship with the customer, many major retailers, maybe most of them this season, offer free returns. They cover the shipping and the rest of all those extra costs, but, as we've done some reporting —my colleague Victoria has written on this as well — some of those rising numbers, you know, some of the companies are thinking twice about the "free" part...
Brandon Isner, Americas Head of Retail Research, CBRE 07:23
Right, yeah.
Ben Ames, Senior News Editor, DC Velocity 07:23
and are charging shoppers to return those itemsre you seeing that? And, you know, happen as well.
Brandon Isner, Americas Head of Retail Research, CBRE 07:31
Yes, I think that, that it's going to have to happen it because it's, again, you know, talking earlier about, you know, how much h cost goes into that, and then, if you think about the last couple years, just think about the logistics costs and how they've risen: fuel prices, salaries for drivers, warehouse space has increased in cost. and so there's a lot of cost in this. But, you know, it's an interesting front that they're dealing with, because on the consumer side, another interesting takeaway from from the U.S. data from our Global Live-Work-Shop Report is that 56% of people agree with the statement that "I will not shop from an e-commerce retailer if there is no free return," and that data, opposed to just 17% who disagreed. And those numbers are consistent. We broke it down by where people live and their age group and educational components, and those numbers are fairly consistent. So, you know, a lot of people, they don't really want to pay for the cost for returns. So there's gonna have to be some give and take between those two parties in what happens going forward, because, again, it is expensive.
Ben Ames, Senior News Editor, DC Velocity 08:50
Yeah, those are two big forces clashing, because CBRE, I know, in other research also references that there's a typical e-commerce, at least, return rate of between 15 and 30% of goods that are bought, which I mean, on the high end, that's nearly one in three items that are bought. So it seems like this trend, despite all the changes, is really here to stay.
Brandon Isner, Americas Head of Retail Research, CBRE 09:15
It probably is, and you do have some people that are starting to think about — you know, one of the big topics that we that we get asked about a lot are ESG strategies, and and focusing on that E, on the environmental impacts of things. And there's some people out there that are trying to consume less in order to you know, ease up their footprint, and and some people are thinking about that in terms of e-commerce, because a lot [of] things come in plastics and boxes, and it can create a considerable amount of waste for for just one thing. And then, you think about the return process. In order to make a smooth return lot of retailers and e-commerce retailers will will have extra boxes with it, so they can have a quick and easy return that's already postdated and so — or already posted. And so, I think you're right. I think the trend is probably here to stay, that the returns are always going to be an issue, but the good news is that there's there's probably a technology solution in that, that there's some retailers that are already starting to put — to implement drone delivery. What if we can return things by drone in 10 years? So, it's not going to go away that people will want to return things. Heck, I have a few things that I need to return from this holiday, still, that I need to get on, because I'm behind the statistics. But no, it's — gift-giving is difficult. Gift-giving actually is one of the highest-penetrated e-commerce categories of retail. Most people prefer online to buy gifts, and so, that's just a reality of the holiday season and any gift-giving season, that there's going to be high e-commerce sales, and there will be a high number of returns. It's just a reality, and you know, perhaps technology can help streamline it and maybe make it more efficient going forward.
Ben Ames, Senior News Editor, DC Velocity 11:24
It's really really interesting stuff, and one of those things that touches, really, most of us. Brandon, we really appreciate your coming on the show to talk us through some of these trends today.
Brandon Isner, Americas Head of Retail Research, CBRE 11:34
Happy to be here, yeah. Any time. Happy to help.
Ben Ames, Senior News Editor, DC Velocity 11:38
Thank you. Our guest here today has been Brandon Isner from CBRE. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 11:43
Thank you, Brandon and Ben. Now let's take a look at some of the other supply chain news from the week. And Victoria. the government this week released a blueprint for decarbonizing our nation's transportation sector. You wrote on that topic. Can you share the details on what it means moving forward?
Victoria Kickham, Senior Editor, DC Velocity 12:01
Absolutely, Dave, happy to. So, yeah, the Biden administration took a step closer to its emissions-reduction goals this week with the release of an interagency blueprint to decarbonize the nation's transportation industry. The plan addresses all passenger and freight travel modes and fuels, and it's actually the first deliverable following an agreement last year between the U.S. departments of Energy, Transportation, Housing and Urban Development, and the Environmental Protection Agency. In a nutshell, the blueprint lays out a plan for achieving the administration's goals to secure a 100% clean electrical grid by 2035 and achieve net-zero carbon emissions by 2050. Among the goals that the agencies identified this week: they want to aim for 30% of sales of new medium- and heavy-duty trucks and buses to be zero-emission by 2030, and for 100% of them to be zero-emission by 2040. They also say they'll ensure that 100% of the federal fleet of such vehicles is zero-emission by 2035. The agencies also want to encourage greater use of rail for passenger and freight travel; that's to reduce emissions from road vehicles. And they want to increase production of sustainable aviation fuel, or SAF, to at least 3 billion gallons per year by 2030 and approximately 35 billion gallons by 2050, and they say that's enough to supply the entire sector. The specifics are still to come, and the agencies involved say they'll develop plans in conjunction with other groups: state and local agencies, philanthropic organizations, and the like. And these efforts are actually linked to last year's Inflation Reduction Act, which includes a range of climate-related goals and incentives this administration has been working on since the President took office.
David Maloney, Editorial Director, DC Velocity 13:51
Now these all sounds like good ambitions, but how's the industry reacting to these goals?
Victoria Kickham, Senior Editor, DC Velocity 13:57
Yeah, you're right. Well, the blueprint was released earlier this week, I think it was Tuesday. so it's still new. and of course, as I mentioned, the specifics, specific plans are still to come. But there are actually some concerns over aspects of the administration's net-zero goals in relation to alternative fuels. A group called the National Association of Truckstop [Operators], or NATSO, and another group called SIGMA, which represents fuel marketers and convenience store chains, say they're worried about the implications of fuel policies on the trucking industry. They say the administration is incentivizing investments in sustainable aviation fuel, or SAF, as I mentioned earlier, over trucking-industry renewables such as biodiesel, which have been used for more than a decade to lower emissions in trucking. They explained that the use of SAF is less prevalent. Essentially, the Inflation Reduction Act, which I also mentioned, it awards a higher tax credit for SAF than for biodiesel and similar trucking-industry renewables, and this week's blueprint sort of emphasizes those incentives. So, NATSO and SIGMA are arguing that because both of those fuels, SAF and biodiesel, they come from the same feedstocks, so they're made from the same thing, producers will be incentivized to make SAF rather than biodiesel, and that may lead to lower availability and higher pricing of clean fuels for trucking. Their argument is that parity between the tax credits is really needed to ensure that producers continue to make biofuels for trucking fleets, so they'd like to see, you know, both fuels promoted equally, I spoke to leaders at both groups, and they also expressed concern this issue could affect trucking companies' sustainability efforts under ESG goals, which Ben and our guest mentioned ESG earlier, its environmental, social, and governance. The use of renewable fuels is a really prominent way for trucking companies, 3PLs to enhance their ESG scores, so limiting access to biodiesel and similar fuels, or making it more difficult for them to afford those fuels, will put a damper on those efforts. So that's a concern. David Fialkov, who's executive vice president of government affairs for NATSO and SIGMA, said he expects this issue to come under some scrutiny as the Inflation Reduction Act and related policies are implemented. He told me he expects some members of Congress, including the new majority in the House, will be, may be interested in examining whether or not it makes sense to keep a heightened credit for SAF. So, as you said at the outset, good news that we continue to move toward a greener transportation market, but there still are some issues that may need further work or discussion...
David Maloney, Editorial Director, DC Velocity 16:40
Right.
Victoria Kickham, Senior Editor, DC Velocity 16:41
...potentially.
David Maloney, Editorial Director, DC Velocity 16:41
And I assume, like most government efforts to transform industries, it will take a while. and I'm sure a lot of the details would need to be worked out before we see any kind of meaningful impact on it.
Victoria Kickham, Senior Editor, DC Velocity 16:51
That's right.
David Maloney, Editorial Director, DC Velocity 16:52
Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 16:53
You're welcome.
David Maloney, Editorial Director, DC Velocity 16:54
And Ben, you wrote this week about what many insiders feel will be the tech trends of 2023 for our supply chains. Can you tell us what topped the lists?
Ben Ames, Senior News Editor, DC Velocity 17:04
Yeah, glad to. It's early January, so every time — every year about this time, vendors and analysts love to talk about what you just mentioned: which of these buzzy and popular tech trends will really hit it big in the new year. That conversation is a little more complicated this year, because of all the market volatility we're familiar with: the inflation, the high interest rates, supply chain delays, all that stuff. Despite those challenges, there's a New York-based analyst firm called ABI Research, and they took a shot at making their predictions anyway. One of the interesting parts to me was their list of top technologies that may have a lot of speculation and commentary, but probably will not shape any big markets in 2023. So, some of those biggest flops, or maybe they're just delays, could include the industrial metaverse; 5G fifth-generation wearables; printed electronics; and satellite-to-cellular services. So, in case you're wondering, I dug into the definition of some of those, particularly the industrial metaverse. That would be how staffers at industrial and manufacturing firms create online avatars of themselves, for each person, and then solve work challenges in virtual worlds. So, instead of going down that road, ABI Research said, companies are more likely to spend on more proven solutions, like maybe developing better feedback loops between design teams, engineering teams, manufacturing teams, or like the digital twins that we often write about, which mirror the machines and production lines and facilities that the companies use.
David Maloney, Editorial Director, DC Velocity 18:47
Yeah. Well, it's interesting to hear about some of those things that we won't see, but did the report also forecast the trends that will make it?
Ben Ames, Senior News Editor, DC Velocity 18:54
Uh, yes, of course. ABI also named dozens of technology innovations that they think will likely bear fruit in the new year. They highlighted things like foldable electronic devices — you may have seen some television ads for the hinged smartphones, I guess; artificial intelligence in our smartphones; growth in wearables; private cellular networks at outdoor venues — talking about stadiums, maybe, or factories; and enterprise virtual reality. So, again, to look at a couple of definitions here: AI in smartphones include some things we're already familiar with, like voice assistants and smart photographs, as well as developing use cases like immersive multimedia gaming, better security. Growth in wearables could include applications like bone-conduction headphones. That sounds funny, but it has roots in the hearing-aid devices, because they bypass the eardrum and they send the vibrations directly into your inner ear, so that could grow into wider use. And wearables could also include things like fitness tracking, you know, for sports, and also for medical uses, like monitoring patients' conditions. And finally, enterprise VR is when you use VR for training. So, ABI Research says that's helpful because it allows users to have infinite adjustment and repetition — they can go over and over certain things — and of course, it's great for remote or off-site training. So, those things can really help cut costs. So, there's some neat stuff here, and we're watching the free market do its thing, which is to sort out the new technologies that really work and provide ROI from the ones that might be just a flash in the pan, but we'll we'll keep covering all these things as it plays out over the year.
David Maloney, Editorial Director, DC Velocity 20:39
Yeah, that's the beauty of innovation in our market. Good ideas usually flourish and can make a lasting impact. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 20:46
Glad to.
David Maloney, Editorial Director, DC Velocity 20:48
We encourage listeners to go to DC Velocity.com for more on these and other supply chain stories, and check out the podcast Notes section for some direct links on the topics that we discussed today.
And again, our thanks to Brandon Isner of CBRE for being our guest. We welcome your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters and your favorite podcast platform. Our new episodes are uploaded on each Friday.
And speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane. It's coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. Subscribe wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by Beckhoff. Have the entire digital fulfillment center at your fingertips with automation by Beckhoff. It's digital transformation done right. For more information, please visit Beckhoff.com/intralogistics.
We'll be back again next week with another edition of Logistics Matters, when we'll look at cybersecurity and our guest will be retired General Brett Williams, the former head of the U.S. Cyber Command, so be sure to join us. Until then, have a great week.
Articles and resources mentioned in this episode:
- CBRE
- Government agencies release blueprint for decarbonizing transportation
- Volatile markets could trip up buzzy new technologies in 2023
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly’s Supply Chain in the Fast Lane podcast
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