Is the cost of living crisis the final straw for free returns?

James Hyde
19 December, 22

As retailers come up against increasing cost pressures, several appear to be introducing fees to consumers for returns. So, has the cost of living crisis heralded an end to free returns?

Although some retailers have introduced marginal returns fees, broadly speaking, they will not safeguard gross profits. Further, despite the fact that many retailers fear the impact of removing the option of free returns and charging for them instead, more and more consumers are also openly exploring and considering sustainable products and brands that embrace the circular economy.

To deal with these challenges, retailers need to consider a dual approach. They need to merge a highly efficient fulfilment and returns process with effective ethical positioning. This will allow them to reduce costs significantly, and enable them to greatly improve customer experience and perception, explains James Hyde, Chief Product Officer & Founder, James and James Fulfilment.

A Problem On The Rise

As retailers prepare and manage sales during the golden quarter, the cost of returns is an important consideration to focus on. Last year’s Christmas period saw record levels of returns and, with the cost of living crisis, 2022 could be even worse. Customers are becoming more careful and measured with their purchasing decisions – which could lead to higher numbers of returns, especially within fashion.

One likely trend is that consumers might not immediately reduce their order value; but they might choose to keep fewer items.  Certainly ‘wardrobing’ – the act of buying a product, using it and then returning it as ‘unused’ to attain a full refund – is on the rise.

Many shoppers will also intentionally be on the hunt for better deals.  Those making impulse buys will be more likely to reconsider their habits too  – especially if there are any delivery delays.

The customer is not always to blame though. At times the wrong product is delivered by retailers. The item might not actually be as advertised. Or, it could arrive late or damaged –  all valid reasons for a return. These kinds of incidents typically result in a bad customer experience with the brand after making the order. But these issues are all addressable for retailers and should be prioritised.

Outsourced fulfilment that leverages a single, integrated order management system (OMS), Warehouse Management System (WMS) and courier management system (CMS) can optimise operations and reduce returns. Picking and packing should be 99.9% accurate. Same day dispatch should be a given, alongside carefully managed and tracked delivery services. Ensuring every aspect of the fulfilment process is optimised and accurate will eradicate any ‘retailer blame’ reasons for returns, allowing the focus to shift towards changing customer behaviour.

The Tide Is Turning On Returns

After decades of free returns retailers are toughening up. The tide is turning and major retailers – such as Boohoo, Next, Uniqlo, and Zara – have removed free returns. Sure, as the headlines focus on the need to reduce the “try-on hauls” seen on YouTube and TikTok, data is also key to understanding trends and highlighting problem customers too. Amazon and John Lewis both banned the same customer in August, after repeated returns and complaints.

Fast, accurate fulfilment data is fundamental to highlighting issues across the retailer’s products and/ or processes. Repeated returns of the same product due to small sizing, for example, can be addressed by changing the product description and adding advice to size up. Electrical items that repeatedly break are a huge financial and reputational drain and should be rapidly withdrawn from sale to minimise loss.

Data is key to addressing the inventory problems created by returns – many of which arrive weeks later, potentially damaged.  It takes time and money to get these products back into stock and ready to sell. Without live, up to the second inventory levels fed directly to the webstore, retailers will be left with unsold items – and potentially miss the key sales opportunities in the run up to and through the Christmas trading period (e.g. Black Friday).  Retailers also need to better understand the true cost of returns to the business to better measure the margin impact on products, and to support future merchandising decisions. Establishing whether products from certain manufacturers or suppliers are more likely to be returned than others, for example, is key to safeguarding margin in the future.

Now Is The Time To Change Perception

Improving eCommerce processes will have an impact on the number of returns experienced. But retailers can also alter their messaging and highlight how important sustainable purchasing behaviour is today. Returns cause a great deal of damage to the environment. Aside from the increased shipping and transport costs that are incurred, the process is labour intensive with the necessary additional sorting and refolding of goods that needs to take place, in the case of fashion. What is more, plastic poly bags cannot be reused either and damaged items sometimes end up in landfill.

Therefore, charging a small return fee – alongside more cost-conscious customers – could generate significant environmental benefits, while reinforcing consumers’ perception of the retailer. Moreover, according to Deloitte, circularity and customer attitudes towards sustainability are increasingly becoming important in driving customer engagement before, during and at the end of product life.

Conclusion

It is possible to change consumer behaviour. Introducing the five pence charge in 2015 for plastic bags reduced usage by 85% in one year. The number of bags purchased has continued to drop since then too. Retailers can share the sustainability issues with customers – and the way returns strategies are considered, presented and delivered will increasingly inform customer perception of a retailer. Executed well, an effective, efficient and well-communicated returns model will reduce costs and boost reputation.

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