Ecommerce Returns Donation: Do Well By Doing Good

ecommerce returns pile of jeans feature

Ecommerce returns can be donated (Photo credit: Maude Frédérique Lavoie on Unsplash

The National Retail Federation (NRF) estimates that ecommerce returns represent about 20% of goods sold online. And that’s a costly proposition for multi chain e-tailers. In most cases, returns mean the seller has paid for shipping twice (to and from a customer) without getting a sale.

Ecommerce returns need to be inspected and repackaged, which takes valuable time. That’s if (a big IF) the merchandise is returned in good condition. Plus, you’re taking a chance that the product won’t go out of style or expire before it can be resold. It’s unlikely most returns can be resold at full price, so even brand-new merchandise can end up at a liquidation warehouse or in the trash heap.

Rather than trashing merchandise or selling it to a liquidator, where you can’t control brand identity, consider donating your ecommerce returns. The resulting tax break may be quite handsome, and it may even be more financially beneficial than reselling the merchandise at a cut-rate price. The growth in recommerce is an option for some merchants, but not for all.

Just donating ecommerce returns to a nonprofit, though, comes with its own headaches. You have the task of vetting an organization, making sure it will accept what’s being offered, understanding how it will be valued, and figuring out how and where merchandise has to be delivered.

Gifts-in-kind donation organizations do that legwork for you. These organizations will accept most of your overstocks and returns, whether it’s a truckload or a few cartons, at any time of the year; ensure those items go to qualified nonprofit organizations, and, if you wish, give you a full accounting of how your donations were used.

Thanks to the generosity of donors, quality, brand new merchandise is given each year to U.S. schools, churches and nonprofits, allowing them to stretch their budgets, get more done with less money and even expand services.

Donated merchandise runs the gamut from educational products, safety supplies, books, clothing, crafts, office items and a myriad of other goods. Many of this country’s leading corporations have discovered that in-kind giving is extremely beneficial to their bottom line and they’re doing something good to boot. Giving in-kind makes you feel good, and you are assured that your merchandise won’t end up on the open market or have the brand diluted. Plus, your company may qualify for a substantial tax deduction.

Section 170(e)(3) of the Internal Revenue Code states that when Regular C corporations donate inventory to qualified nonprofits (also known as 501(c)(3), they can receive a tax deduction equal to up to twice the cost of the donated products.

Under the tax code, deductions are equal to the cost of the inventory donated, plus half the difference between the cost and fair market-selling price, not to exceed twice the cost.

For example, if your product costs $10 and you retail it for $30, the difference is $20. Half of $20 is $10. So, $10 (product cost) plus $10 (half the difference) equals a $20 deduction. As $20 does not exceed twice the product cost, it is an allowable deduction. It’s that simple.

There’s no one solution to the issues caused by ecommerce returns. But in-kind donations can be an integral part of the solution for your business and will certainly help others.

Gary C. Smith is President and CEO of the National Association for the Exchange of Industrial Resources (NAEIR)