The rush of Black Friday and the advent of Christmas are make-or-break times for retailers and getting the returns process right is crucial if retailers are to end the year on a high.
Major international players, like Boohoo and Zara, recently started charging customers for returning items bought online. It has started a furore across the industry, with some – particularly pureplay online retailers like Asos – still adopting a policy of free returns. It begs the question as to how retailers should adapt their returns policy to reap the rewards of peak season.
The cost of returns
While estimations over impact vary, according to an April survey by shipping and mailing company Pitney Bowes, online returns cost retailers an average of 21% of overall order value. With customers returning more items on average since the pandemic and trends such as wardrobing on the rise, the cost of returns has never been higher for retailers.
According to GlobalData, by 2023 retail returns will have increased by 27.3% in five years, hitting a total of £5.6bn. They are clearly a key consideration for retailers looking to protect revenue and sales. When coupled with other issues facing the industry like inflation, increasing wages, and fuel surcharges, it’s a chunk of profit that retailers need to recoup. And moving away from free returns has, for some, become part of the solution.
A March 2022 study by ZigZag found that 75% of customers expect a good returns policy to be free of charge. These customer expectations stand in contrast to the realities facing retailers ahead of peak season. It is crucial that retailers keep their returns policy competitive even if they cannot offer exclusively free returns.
For this to happen, retailers need to provide greater flexibility over their returns process. Offering a wider array of options, including free returns in certain circumstances, is crucial. Customers value retailers that embrace flexible demands and can adapt their returns policy to customer spending habits. 45% agree that a good returns policy should provide multiple options for returns.
Saving the sale
When customers are under pressure, through inflation or the cost of living crisis, retailers’ sales are as well. Giving customers a choice and presenting them with an array of options, whether that be through free returns, exchanges, or return to gift card, will satisfy customers and save the sale for the retailer.
Moving away from a blanket approach to returns is how retailers can start striking a balance between being commercial and differentiating. Embracing a flexible policy can provide greater convenience for all, especially as we approach the Black Friday Cyber Monday and Christmas sales. Offering the opportunity to refund as a gift card or live exchange will negate the impact of returns on the retailer as more customers begin opting for options that protect retailer’s profit margins.
The four R’s
Incorporating the four R’s into their returns strategy – resale, repair, rental, and refills – can also help retailers to save the sale. Selfridges, for example, is aiming for these options to make up half of all transactions by 2030. Though the circular trade only makes up less than 1% of Selfridges’ transactions with shoppers, the repair and resale options now available (and on the rise) show that retailers are listening to concerns over sustainability and greater flexibility over returns.
The initiative is a sign that retail is moving in the right direction. A product that would be heading to landfill 10 years ago has a far greater chance of being repurposed, repackaged, and re-used in 2022. It is an example for retailers to diversify their return options, both to satisfy the customer and make meaningful progress towards net zero targets.
The future of returns
Getting the returns window and policies right is crucial for retailers if they are to stay commercially competitive during peak season sales. A return policy needs to be communicated clearly to customers and there has to be a variety of return options available.
Selfridges commitment to the circular economy is an approach that will likely be at the forefront of retailers’ minds in the coming years. Those that don’t provide these options will surely start lagging behind. A clear and flexible returns policy will keep retailers commercially competitive whilst keeping the customer experience efficient and transparent.
Laura Davies is head of client success at ZigZag Global