Should retailers charge customers for returns?

More and more retailers are now charging their customers to return items bought online. This is in response to a common consumer habit that has increased significantly in recent years: many customers routinely purchase different lines, styles, colour, sizes and fits of clothing to try out – but always intend to return some or most of them.

Research conducted in 2018 by Barclaycard reported that almost 10% of shoppers buy clothes to post photos on social media then return them. Rates rise to one in five of 35-44 year-olds, while men are more likely than women to send clothes back after wearing them.

This behaviour comes at a huge environmental cost, as returned clothes are more likely to be thrown away than resold. In the US alone, 2.6m tonnes of returned items are placed in landfill every year, which accounts for 15m tonnes of carbon dioxide emissions annually. 

Many major online retailers and chain stores, including Boohoo, Zara and Next, have taken a stance against these habits, prompting much discussion and even anger among shoppers. Approaches differ from brand to brand. For example, fast-fashion retailer Bohoo is charging £1.99 per parcel with returns only remaining free for subscription-based customers, whilst Zara is charging £1.95 only when returning via post. Meanwhile, Next is charging £2.50 for return parcels, which are now collected from your address.

Many shoppers are unhappy at the policy changes and how they’ve been communicated. The general feeling is that for the paying customer, this is bad service and could impact their likelihood to buy. Research seems to support this: 66% of online consumers will review a company’s returns and refunds policy before deciding to buy and the vast majority (81%) are more likely to proceed to checkout if they are offered free returns. 

A major concern for brands, therefore, is how their new policies could affect customer loyalty. Broadly speaking, paid returns can be a double-edged sword – with both downsides and benefits. An obvious negative is disaffecting customers who must pay to send back an item they don’t like. This is a serious concern, given the worsening cost of living crisis - which is only just beginning to take effect, according to most economic forecasters. 

But there are many positives that can arise from returns charges - both for brands and customers alike. Here are three opportunities retailers should pursue.

1. Improving customer satisfaction

Data collected from customers can increase loyalty - if used correctly. For example, tracking which items a customer brings back and which they retain allows retailers to shape a more personalised, targeted service, with promotions and recommendations geared to shoppers’ individual tastes, style and size. 

Retailers can use this information to connect better with their audience and understand why people are returning in the first place. This will not only enhance the relationship, but also reduce future returns along with the costs and inconvenience for everyone.

Retailers should work to ensure customers are happy with their purchase to avoid returns altogether. There are a number of ways to do this that can result in higher customer satisfaction and greater transparency. For example, providing user generated content of products online, 'true to size' indicators, and chat forums, can all help the customer to get the best understanding of the product and make the right purchase, the first time around.

2. Incentivising in-store visits and brand loyalty

Free returns to store offer from retailers with postal or collection charges will drive shoppers to their physical outlets. Here, customers are likely to browse and make impulse purchases or look at possibly exchanging their item instead of making a full return. 

And it’s another chance for brands to collect customer data – heling to further improve personalisation of offers for the next online or physical visit.  

3. Offering a subscription-based service

Most consumers object to the idea of paying to return their unwanted items. However, if they can avoid this unpopular levy by signing up to a subscription service that also brings a suite of other benefits at low cost, many will jump at the chance. And those who do so are more likely to stay with that retailer in the long-term.  For example, Boohoo’s returns remain free for premier customers who already pay a subscription.

Again, the detailed analyses of shopping habits that subscriptions allow can be put to work tailoring promotions, launches and details of lines that match members’ tastes. By knowing everyone consumer’s behaviour inside out, the retailer can meet their needs first time, more of the time, gaining their trust and continued business, while simultaneously slashing return rates. 

Crucially, these routes could well deliver lifesaving competitive advantage amidst the fierce competition for every penny of what will be much smaller disposable incomes for most people during a period of economic recession. 

4. Building a more responsible retail ecosystem

Significant reductions in returns are a huge step forward in the crucial drive to achieve sustainable shopping. Fewer unwanted products will be produced; less water, energy and raw materials will be used in manufacture, transportation, storage and disposal; and fewer items will be burned or sent to landfill. Communicating this in marketing and promotional material, including on social media, is likely to be highly popular with clothes shoppers - particularly younger ones.

Consumers are greatly concerned about where products come from and that they are brought to market without causing harm to people or environments. And it’s not collective conscience twitching with no meaningful action: many engage with the process and, whilst they do their own research, offering it to them directly is likely to enhance their trust in a brand.

Online searches globally for sustainable goods have increased by 71% in the last five years, according to recent research commissioned by the World Wildlife Fund (WWF), with most of these coming from young consumers – those most likely to purchase most often.

Clothes buyers are quick to condemn and publicise wasteful, environmentally damaging business, which can damage brand reputations irreparably. Again, this could be a deciding factor in the upcoming consumer war for loyalty and spend. The retailers who can best demonstrate responsible, ethical, and ‘green’ operations - from manufacture down the supply chain to store or screen – will emerge as the real winners.

Embrace returns charges for a better future

Brands who feel they need to do something to stem the rising tide of mass returns shouldn’t reject imposition charges. The key to implementing them effectively – so that outlay is reduced without lowering revenues – is to, firstly establish that they’re a viable route for the business and then incorporate them effectively into the customer journey. 

It may well be worth seeking recommendations for retail consultants with a great track record for improving the customer experience. They can advise whether the levies are a good idea in the first place, then help to guide the process.