SECTOR FOCUS – Return to sender

It has been estimated that every third fashion item purchased online in the UK is returned, at a cost to the British fashion industry of £7 billion annually.

Is it any wonder then that the likes of Zara, Boohoo Group and Next are looking to charge customers for returning unwanted online buys?

This move has not proved popular with consumers however, as a number of recent surveys have found. Digital receipt start-up Slip claims 67% of shoppers would not purchase an item online if there were to be a £2 return charge.

While, Product Performance Management platform provider ROI Hunter found half of shoppers wouldn’t shop with a retailer that charges for online returns.

“Retailers charging for online returns run the risk of losing customers at a time when they need them most,” explains Karel Schindler, ROI Hunter chief executive.

So do retailers charge for returns and lose customers or take the financial hit associated with the sheer levels of refunds given. ASOS has already reported reduced profits due to excessive returns.

Blaming “inflationary pressure” impacting shopping behaviour, the etailer said sales are now expected to be in the range of 4% and 7%, while profit before tax is expected to be between £20m and £60m.

With energy prices starting to hit households and a possible recession on the horizon, retailers could see even more returns.

“It is too early to tell for how long the current pattern of customer behaviour will continue but we are taking swift and decisive steps to minimise the impacts whilst continuing to deliver against the strategic initiatives we laid out in November that will ensure that ASOS builds for the long-term,” says Mat Dunn, COO of ASOS.

Costing the earth

It is not just the financial cost of such returns that is a concern to retailers, but the cost such a returning trend has on the planet.

According to recent research by Roland Berger, around 3% of returns cannot be resold and therefore are sent straight to landfill. The strategists added returns also create “needless CO2 emissions” through reverse logistics.

These issues are something consumers aren’t even aware of according to Slip’s survey. It found 33% of respondents never consider the environmental impacts of returns, and only 6% consider the environment all of the time.

While highlighting the sustainability issues surrounding the trend of ecommerce returns may help change some consumers’ shopping habits, there are more fraudulent forms of returns that also need to be addressed.

Wardrobing – when consumers buy merchandise use it briefly, sometimes just for a picture, and return it for a full refund – in particular is hitting retailers where it hurts, as these items are often unsellable, illuminating the chance for resales.

Furthermore, serial returners will also have an impact on retailers’ bottom line, is banning such offenders the way to go? Is that even achievable? According to Brightpearl, 44% of retailers don’t have adequate technology at their fingertips to identify a serial returner.

What retailers do have access to is data, and this could be key to understanding what drives returns behaviour. Beauty brand Sephora tracks customer patterns in order to identify excessive returns.

Such data can also be used to understand why loyal customers send items back, and therefore help to improve not only the customer experience, but perhaps discover a way to limit the sheer number of returns.