e-commerce growth forces firms to rethink accruals, margins, and sustainability.
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accounting arc
with liz mason, byron patrick, and donny shimamoto
center for accounting transformation
holiday shopping has never been easier. with a few taps on a smartphone, consumers can buy gifts from bed, track deliveries in real time, and return unwanted items with minimal friction. but behind that convenience lies a complicated accounting reality—one that came into sharp focus during a recent episode of accounting arc.
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hosts donny shimamoto, cpa.citp, cgma; byron patrick, cpa.citp; and liz mason, cpa, examine the financial, operational, and environmental consequences of e-commerce returns, using the holiday season as a lens to explore broader shifts in consumer behavior and business sustainability.
industry research shows that nearly 25% of e-commerce purchases are returned after the holidays, compared with less than 9% of in-store retail purchases. for accounting teams, that disparity introduces volatility into revenue recognition, inventory valuation, and profitability forecasting—often at the worst possible time of year.
holiday sales occur at a critical accounting juncture. companies must finalize year-end financials while return activity is still unfolding. as mason, ceo of high rock accounting, notes, accrual accounting depends on historical patterns, but shifting consumer expectations and buying habits complicate even well-established models.
inventory decisions are equally fraught. retailers order earlier each year to capture seasonal demand, tying up cash and increasing holding costs. unsold inventory often requires post-holiday discounting, further compressing margins before returns are even processed.
patrick, co-founder and educator for tb academy and senior product manager for karbon, emphasizes that returns aren’t simply reversed sales. many items—especially apparel and footwear—cannot be resold at full value. some are liquidated at pennies on the dollar; others are discarded entirely.
the secondary market and invisible waste
returned merchandise often disappears into a complex secondary ecosystem of liquidation auctions and resale platforms. while this creates opportunities for bargain hunters, it also masks the true scale of waste generated by overconsumption.
the hosts discuss how these hidden costs are absorbed into pricing models, effectively spreading the financial and environmental burden across all consumers.
buy now, pay later—and pay later still
adding another layer of complexity is the rise of buy-now-pay-later financing. what feels like frictionless purchasing can obscure long-term financial risk for consumers and businesses alike. as these tools expand beyond retail into services and subscriptions, accountants must assess their impact on cash flow predictability and credit exposure.
esg as a rebalancing tool
shimamoto, founder and managing director of intraprisetechknowlogies llc and founder and inspiration architect for the center for accounting transformation, connects these challenges to esg reporting, framing sustainability not as a compliance exercise but as a strategic decision-making lens. drawing on concepts rooted in environmental stewardship and community self-sufficiency, he suggests esg can help businesses evaluate growth beyond short-term revenue.
environmental impacts, social responsibility, and governance practices intersect directly with supply chains, returns, and waste management. for accountants advising business owners, esg offers a framework to align profitability with long-term resilience.
is change coming?
younger generations appear more open to secondhand goods and less attached to constant consumption. technology is enabling resale at scale, potentially easing some pressure created by returns and waste. whether this represents a lasting shift or another cyclical trend remains uncertain. what is clear, however, is that accountants play a central role in translating these forces into insight—helping businesses understand not just what they earn, but also what their decisions cost.
10 key takeaways
- e-commerce return rates far exceed in-store retail.
- returns complicate year-end accruals and revenue recognition.
- inventory timing and discounting pressure margins.
- many returns become waste or low-value liquidations.
- buy-now-pay-later tools increase financial risk.
- esg reporting offers a broader sustainability lens.
- secondary resale markets are growing rapidly.
- younger consumers may value reuse over convenience.
- consumer behavior directly affects accounting outcomes.
- accountants are key to balancing growth and sustainability.