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Is this the end of free returns?

by Ozva Admin
free returns

Free returns could be coming to an end as some of the world’s biggest fashion brands have introduced fees for returning packages.

Both Boohoo and Zara have scrapped free online returns in recent months and H&M is considering joining the pair.

These brands are not alone. According to an investigation of lab Pack, a quarter of 200 leading online retailers are now charging buyers to return items in the UK, an increase of 14% year-on-year.

It’s no surprise why some retailers have made this move. According to returns specialist ReBound, one in three fashion items purchased online is returned. This is about twice the rate for store-bought goods.

DHL Supply Chain’s senior vice president of global e-commerce, Nabil Malouli, says £653 billion worth of goods were returned in 2021, which is very costly for retailers.

Meanwhile, the yields are increasing. Asos noted last month that, as of May, its return rates had risen above pre-Covid levels.

Boohoo also said earlier this year that its returns have “increased significantly” year-over-year, above pre-pandemic levels.

Rising return rates, combined with elevated fulfillment costs, have affected both retailers.

This is why Boohoo decided to introduce a charge of £1.99 to return items.

Boohoo CEO Neil Catto says:: “It makes people think twice before ordering three different styles and then returning two.”

boohoo
Boohoo introduced its return fee due to the increase in return rates

customer reaction

But how have shoppers reacted to the introduction of return fees?

Social media fired up as Zara and Boohoo quietly filed the charges with some threatening to stop shopping with the brands. Others argued that the reason they are returning items is because of inconsistent sizing across retailers.

These outspoken Twitter users are not alone. a recent Klarna survey found that 70% of online shoppers said that if a preferred retailer stopped offering free returns, they might stop shopping there, which could have a massive impact on commerce.

Meanwhile, three-quarters of shoppers said they would buy more over time if free returns were offered.

Deloitte retail director Marie Hamblin says there is real potential for a return fee to hurt trade.

“Passing the full or partial cost of a return to the customer isn’t necessarily the right thing to do for all retailers,” he says.

“Some will decide it’s not for them given the potential impact on sales. Offering free delivery or returns is often a sales driver and some retailers can expect to see reduced sales volumes by removing this.”

Robert Kulawik, COO of Everything5Pounds.com, has charged for delivery and returns since the brand’s inception.

He says: “We have to stop spoiling customers, especially when they don’t ask for it. Many retailers offer free delivery, free returns. Why? It’s not free for us.”

Kulawik insists that customers don’t mind paying for fulfillment as long as retailers are transparent about the charge.

“In fact, it makes them buy more because they want to make the charge worth it,” he says.

However, one retailer says the move will hurt demand, particularly for online-only retailers.

“If the retailers don’t have a store, then the living room is the customers’ locker room and they don’t charge you to try something on the high street,” he says.

“It may only cost £2 to return, but there is an element of risk in the transaction. Customers have to pay for something they may not buy.”

However, Tatiana Lisitsina, a senior retail analyst at Bloomberg Intelligence, notes that the introduction of return fees appears to have had little impact on Zara and Boohoo.

However, DHL’s Malouli argues that retailers like Zara and Boohoo have a loyal customer base, so they are less likely to see backlash when introducing a return charge.

“Zara and Boohoo will see greater success in implementing a charge for returns,” he argues.

On the other hand, brands that lack customer loyalty “would probably compete at a disadvantage if they introduced fees,” Malouli adds.

It should also be noted that Zara has mitigated risk by giving shoppers the option to return online orders for free to their local Zara store.

Are free returns a thing of the past?

With early positive signs from Zara and Boohoo, will other retailers follow suit and introduce a charge for online returns?

The fact that H&M, the world’s second-biggest fashion retailer after Zara, is planning to implement a return fee suggests this could be the case.

The Swedish fashion giant is testing a load online in Norway, although he promised that returns to the store would be free, after the number of returns increased by 30%.

H&M is the latest retailer to charge for online returns
H&M is the latest retailer to charge for online returns

An H&M spokesperson tells the Retail Gazette: “Of course, we will evaluate our client’s response after some time.

“The introduction of return fees is a measure that is in line with a general trend that we see in our industry at the moment.”

Meanwhile, sustainability is a growing consideration for retailers. Discouraging ‘serial returners’ who overorder with the intention of returning the bulk of items could reduce unnecessary transport emissions.

Malouli says it could also reduce the number of products that get destroyed, since returned products can be difficult to resell.

“Eliminating free returns puts retailers on the path to a circular supply chain, driving sustainability,” he says.

Retail expert Jonathan De Mello took to Twitter to predict that more retailers are likely to follow suit given the costs and environmental impact of returns.

The direction of travel is clear. The era of free returns is slowly coming to an end, and while many shoppers may regret the change, it could benefit both the environment and retailers’ bottom lines.

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