The re-opening of the high street and the return of going out has taken an unexpected toll on online fashion. The news that shopper habits forged during lockdown are locked in doesn’t seem to have reached the fast fashion crowd of millennials, Xs and Zoomers, all of whom appear to be not only relishing a good night out, but also physical retail.
Boohoo has been particularly hard hit by this late surge in physical fashion shopping, with its profits taking a spectacular 94% dive for the full year – a hit that was largely concentrated to the last three months of the period, when things have really opened up.
It has lost some of its market share to high street retailers, although boohoo’s figures suggest that this isn’t too severe, having logged £2billion in sales. The real problems are costs and returns.
Increasing costs – of materials, manufacture, distribution, warehousing and delivery – come as no surprise. The cost of living crisis facing the UK isn’t just something that impacts consumers, it spreads right through the economy. But even this isn’t enough to explain the fall in profits at the retailer.
Where it has been hardest hit is in returns. This has become so significant that it has effectively turned a large proportion of sales into losses as the items weren’t sold as far as the bottom line is concerned.
This return to returns is a worrying and unexpected turn of events in retail. The opening up of shops and the freedom to come and go as we please has made returning items much easier to do – even if you have to go to the post office to do it. It is no surprise that, during lockdown and the subsequent restrictions, returns of online goods has been operating at an all time low.
Now, however, shoppers who are buying clothes online are not going to just take their chances; if they aren’t right, they are going back.
This is particularly apparent in fast fashion. The clothes are often cheap enough so that the hassle of returning them in lockdown wasn’t worth the effort. Now its easy enough to make it much more acceptable.
The rising costs of items seen as a result of the cost of living rise is also making ‘cheap’ fast fashion less affordable, again reinforcing the economics of now returning items if they are not right.
The final issue with returns is that the return of physical socialising is likely to also be driving a return to ‘serial returners’ making a reappearance. With things being more expensive, the temptation to buy that party outfit, wear it once, then return it and get a refund is surely growing.
Pre-pandemic, many retailers in the fashion space had take steps to stamp this out, but much of that has gone by the wayside as it simple evaporated as an issue during the past two years. Now, I suspect, it is back.
This rise in returns is not only going to be confined to fashion as the economy darkens. While serial returning isn’t so much of an issue outside of apparel, the need for goods to be just right to justify the growing expense of buying them is a pressure that all sectors are likely to experience and one that retailers all now need to be looking out for.
The economy is going to cause shrinkage of sales, revenues, margins and profits, let’s hope we don’t see that compounded by the rising cost of returns.