Next, Zara, Boohoo, Uniqlo, and Urban outfitters are among retailers who introduced return fees in an effort to reduce returns, and thus costs.
As of May 2022, Zara charges £1.95 return fee for online order. However, in-store returns of online purchases remains free, driving footfall to the stores whilst reducing costs of putting returned items back on shelves.
Next has a similar policy where online shoppers are charged £2.50 for returns and in-store returns are free. Though, Next has a £20 annual package for unlimited free delivery and free returns package which becomes much more attractive to consumers when they have to pay to return online orders by post.
Costs to retailers:
Retailers incur costs when items are returned: shipping, product quality checks, repairs, packaging, new labels, repacking, updates in the systems to name a few. This is one of the reasons for encouraging consumers to be mindful when ordering online.
Consumers often purchase more than one size to compare fit. Furthermore, 9% of UK consumers order clothes to post content on social media and return the item. For every $100 of returned items, retailers lose $10.30 to return fraud. The National Retail Federation in the USA found return rates in the US to be at a record high at an average of 20.8% in 2021 versus 18.1% in 2020. UK retail tells a similar story.
According to KPMG’s survey, the annual cost of returns to the wider industry sits at £7 billion. Online retailer Boohoo is a prime example: Boohoo found that its first quarter gross sales growth of 9% wasn’t accurate when returns were taken into consideration. And in fact, the company’s revenue was in decline by 8%.
Cost to the environment:
Loses are not only incurred by retailers; there’s also a cost to the environment with high return rates. Processing returns is complex and oftentimes more expensive than the products themselves. Therefore, fast fashion retailers are known to send products to landfill sites instead of trying to resell them. In the US alone, 2.6m tonnes of returned goods are sent to landfills every year, contributing to 15m tonnes of CO2 emissions annually.
Reducing returns will ultimately reduce the negative impact fast fashion has on the environment.
Although the introduction of returns fees will have a positive impact on retail businesses and the environment, it is certainly not welcomed by consumers.
Doodle’s poll shows, 84% of consumers consider returns experience to be an important aspect of the shopper journey and 95% said, a poor returns experience will make them reluctant to shop with the brand in the future, costing brands loyal customers.
Without free returns, consumes cannot shop with confidence, especially with size discrepancies. Omnichannel retailers can offer in store return and try before you buy option. However, online retailers like Boohoo must put more effort into sizing with accurate and easy size guides, AR try-ons, improved and consistent fit, and more representative models.
Otherwise, the introduction of return fees will negatively impact the bottom line of online retailers as consumers will seek out business that offer free returns or at least think twice before purchasing, reducing basket sizes.