A poll has found that almost a third (30%) of UK consumers are spending less online because refunds take too long and they’re worried about their bank balance. Similarly, more than half (52%) state they’re less likely to shop with a retailer again if a refund takes a long time to receive.
This suggests that retailers are losing out on valuable revenue and repeat business as a result of lengthy refunds processes.
The news comes as the latest figures from Retail Economics’ Cost of living Tracker finds that middle-income households have seen their spare cash fall £116 per month compared to two years ago.
Meanwhile, retailers are anticipating a difficult year ahead, with many struggling to handle rising costs and falling sales. In a recent survey of UK online retailers, further data revealed that four in ten (40%) retailers are focusing on cutting costs as a result of the current economic environment.
One area in particular which is flagged as a drain on business is returns, with over half (54%) of online retailers saying they are or expect to be forced to stop offering free returns as a result of the economic climate.
Particular pain points for merchants include the cost of processing returns (43%) and the length of time that it takes for a customer to get their money back (40%). But with the returns process being a key differentiator for consumers, online merchants risk adding even more friction to the experience and damaging customer relationships if they begin charging for returns.
Encouragingly, survey – carried out by Open Banking platform Tink – suggest that a significant number of forward-thinking retailers understand that getting refunds right is an essential part of improving the returns process for shoppers and merchants alike. Indeed, more than a third (36%) believe that instant refunds would enhance the customer experience of returns while 32% feel they would ultimately reduce the returns cost to their business.
Tom Pope, Head of Payments and Platforms at Tink, says: “It’s clear that the UK’s online retailers are facing the twin challenges of rising costs and meeting consumer expectations when it comes to returns and refunds. As a result, they risk missing out on vital revenue and repeat business in an increasingly difficult operating environment. In order to turn returns into a competitive advantage in 2023, they can invest in payment solutions that speed up the refunds process and, in turn, boost shopper spend, improve retention and enhance customer experience. Pay by Bank holds the key to overcoming the ‘refund conundrum’ – helping to cut costs associated with returns for merchants and increasing the speed of refunds from days to seconds for consumers. It’s a win-win.”
Disposable income shrinks
The news comes as the latest figures from Retail Economics’ Cost of living Tracker finds that middle-income households have seen their spare cash fall £116 per month compared to two years ago.
Although the Bank of England announced earlier this month that it expects inflation to fall to 3.9% in the final quarter of the year, households are ultimately grappling with a step change in essential costs seen over the past two years, hitting the amount of available spare cash for non-essential purchases.
This comes as key staple expenses continue to soar – in many cases above headline rates. Gas prices are up an eyewatering 194.1% compared to January 2021.Such price rises across highly visible categories including food, energy and fuel have a psychological impact on consumers, leaving households feeling as though inflation is greater than headline figures suggest.
This has a disproportionate impact on poorer households. The least affluent are more exposed to price rises across essentials, as they spend a greater share of income on essentials – around two-thirds compared to less than half for the most affluent.
The step up in the cost of essentials means that, even as inflation softens, most households are still set to face pressure on their discretionary budgets compared to before the cost of living crisis. The step up in staple costs is ultimately leaving households with less discretionary income compared to two years ago, ahead of the cost-of-living crisis taking hold.
Nicholas Found, Senior Consultant, Retail Economics, says: “While inflation is set to fall sharply in the coming months, it’s important to remember that the cost of essential items remains at elevated levels which has eroded discretionary spending power significantly over the last couple of years. There’s a significant polarisation between the least and most affluent in society which signals an uneven impact across the economy as we head into recession. Many of the least affluent households will look to trade down, delay purchases and cancel some spending altogether as the reality of rising winter fuel bills, escalating food costs and rising interest rates punches a hole in spending power. But with the most affluent riding out the storm more comfortably, in part due to elevated levels of savings, there’ll be an air of ‘keep calm and carry on’ as the luxury end of the market remains more insulated from the full impact of the crisis.”
