Has ASOS’ recent decision on returns sparked a merchant revolution or are customers still in the driving seat?
Returns are a critical part of the commerce journey. Even when consumers go in store to touch, feel and try on an item, the product sometimes doesn’t match up to expectation once you have it home. When shopping online, consumers are unable to test the product before purchasing, instead they rely on merchant information or reviews. So, an increase in returns may seem a natural byproduct of an online ecosystem. Generous returns policies, including free returns, have long been a feature of ecommerce, making up for the inability to try items on before purchasing.
However, it is clear that huge volumes of returns are causing online retailers to suffer. Much of this is due to the ‘wardrobing’ trend, in which an item is bought for one-time wear and then returned for a full refund. GlobalData found that online returns in the UK alone are predicted to hit £5.6 billion by 2023, a 27.3 per cent increase over the next five years.
The rise in ecommerce has seen other shifts in consumer returns behaviour, such as intentional returns. Research from Barclaycard found that 25 per cent of retailers have experienced an increase in return rates over the past two years, and 40 per cent of fashion brands reported a rise in refunds.
The popularity of Amazon Prime has meant consumers have come to expect free shipping and free returns. Already, the race to the bottom on pricing is squeezing retailers’ net profits. Yet accommodating consumers’ expectations for fast and free shipping and returns increases the burden on merchants even further. Not to mention the added stress on independent retailers, created by a lack of sufficient infrastructure and efficiency around the increased processing of returned goods.
Last month, the online fashion powerhouse made the surprising decision to not only toughen up its once generous returns policy but also ‘investigate and take action’ against those who excessively buy and return items. In an effort to soften the blow for its consumers, ASOS simultaneously expanded its returns window from 25 to 45 days. Even so, for many, the damage was already done. Loyal consumers took to social media to voice how they felt betrayed by ASOS’ sudden shift in policy, particularly given the new policy fails to define what constitutes ‘excessive’ purchases and returns.
This was a bold move by ASOS and one that threatens its loyal customer base. ASOS clearly felt that this move was necessary to maintain a competitive business model. In reality, ASOS is not the first to toughen up its returns policy in an effort to combat the rising tide of returns and poor profit performance. In 2017, department store John Lewis also announced it was scrapping its generous 90-day returns policy under new rules. Instead, the shop launched a new 35-day returns window for items bought in-store and online.
With its crackdown on intentional and serial returns, ASOS is making the assumption that the long-term business benefits will outweigh – what they are hoping will be - the short-term consumer frustrations. I suspect it will be the first of many UK and international retailers to announce a refreshed returns policy.
However, now’s the time to exercise caution, as not all retailers would benefit from such bold action. ASOS already possessed a loyal customer base and was considered by many to be a beloved brand. This is not something that all retailers can claim. For those who may not have the cushion of a loyal customer base, but are struggling to find ways to deflect the onslaught of returns, there are a number of options available:
● Provide special discounts to consumers that forgo returns - I’ve seen instances where retailers have offered shipping discounts for consumers willing to forgo the two-day shipping timeline. What if we translated this to returns? Part of the reason today’s consumers are so cavalier about returning items is that retailers don’t penalise them for doing so, in fact, they actively encourage it through free returns. Instead, why not offer consumers product discounts if they opt for a “no return policy” that restricts them from making a return on that product? The cheaper cost might incentivise the customer to be more considerate about whether to purchase the item, and the money lost through the discount would likely be less impactful for the merchant than absorbing the full cost of return shipping.
● Offer in-store returns - This should be a no-brainer for retailers with a bricks-and-mortar presence, but it’s also an option for online-only retailers. Amazon recently announced a partnership with big-box retailer Kohl’s to allow its customers to drop-off unpackaged items for return, which Kohl’s will package and send back to Amazon free of charge. Equally beneficial for both retailers; Amazon is giving its customers a more convenient way to return items and Kohl’s expects to benefit from the influx of foot traffic to its store. This model, which could be easily replicated by others, appears to be an effective way for online retailers to cut down on the costs of returns while bringing some much-needed traffic to the high street. Whilst this partnership has been rolled out in the US, it is likely to expand globally.
● Develop an infrastructure to accommodate returns - Some returns are inevitable, so merchants need a process to handle them. Online retailers must think strategically about how they manage their returns policy, balancing business sustainability with customer benefit. A study by Brightpearl found that 69 per cent of retailers were not deploying technology solutions to process returns. This issue only grows as businesses begin to handle a greater volume of returns. Automation is one possible solution to this problem, especially if an ecommerce site operates as a SaaS (software-as-a-service) platform, such as BigCommerce. This platform allows the easy integration of plug-ins to manage returns, such as ZigZag, which helps merchants administrate stock efficiently.
No matter which direction retailers go, one thing is for certain, high return volume is here to stay. Until we find ways to create more confidence in consumers’ online purchases, managing returns will continue to be a large part of the ecommerce picture, but the ways in which retailers deal with the challenge still remains to be seen.
Those that can strike a balance between offering customers shipping benefits, while still paying attention to their bottom line, are the ones best positioned to succeed in today’s rapidly-growing online ecosystem.