Charging for ecommerce returns: Can it be avoided?

The phrase ‘serial returner’ stems from the culture of online fast fashion, and in recent years, the ease with which customers can return their unwanted items for free. Now, however, a shift appears to be occurring, as the likes of Boohoo and Uniqlo have introduced charges for returns sent in the post.

So, why have they taken this step, and what might the impact be on customers? More to the point, what else can be done to improve CX and lessen returns?

Returns are putting a squeeze on profit margins for retailers

Boohoo quietly introduced a £1.99 charge for returns back in July, which it had also hinted at earlier in the year as it posted a fall of 94% in pre-tax profits to £7.8m for the year to the end of February 2022. Despite sales rising 14% year-on-year, Boohoo warned that pandemic-related factors would likely impact the rest of 2022 – one of these being ‘an increased level of returns,’ with rates now having risen higher than they were before the pandemic.

With returns costing retailers a staggering $7bn in 2019 (from shipping costs, increased labour etc), it’s perhaps no surprise that many are once again looking for ways to offset this – particularly amid wider pressures such as inflation.

The return charge has provoked some backlash from Boohoo customers, particularly in relation to the brand’s hit-and-miss sizing and low price point.

Are new charges about profitability or sustainability?

While Boohoo has been up front about the cost of returns, other retailers such as Zara are citing the impact on the environment, using charges to deter customers from returning items via shipping. Zara and other brick-and-mortar retailers are encouraging in-store returns, which remain free.

Indeed, with returns contributing to high carbon emissions as well as an increase in packaging, the cost to the environment is huge. Not only this, but a large percentage of returned items never go back on sale, ending up on landfill sites instead. According to Optoro, an estimated 2.6 million tonnes of returns made in the US ended up in landfill in 2020. The reason for this is that it’s sometimes simply more costly to process a return than to not. As a result, retailers including Walmart have begun asking customers to keep some items even when they receive a refund.

This is not ideal from a customer perspective either of course, with consumers reportedly being more concerned about the environment than ever before, and sustainability being an increased driver in purchasing decisions. It’s a double-edged sword, however, as the majority of consumers still prioritise free returns when choosing who to buy from – something likely to be heightened as the cost-of-living puts increased pressure on budgets. Not forgetting, of course, that there are certainly benefits for retailers too. According to Klarna, 78% of shoppers say they are more likely to purchase from a brand if they offer free returns, while 86% say the option of free returns will make them loyal and more likely to keep coming back to a brand.

With both consumers and brands largely benefiting from free returns, is there an alternative solution that can help minimise costs both financially and environmentally?

How can retailers re-think returns?

Fixing size and fit

It’s perhaps more effective (particularly when it comes to long-term customer loyalty) to confront the root cause. This means finding a way to reduce the number of returns made (thereby reducing cost and carbon emissions), particularly as a high percentage of returns are often due to sizing errors. This can be down to manufacturing issues, of course, but the problem can also be eased by improving online UX. Measures such as including more accurate product descriptions or encouraging authentic reviews could help to prevent customers from ordering the wrong size in the first place.

Some retailers are also looking to technology to help with this. Earlier this year, The Very Group partnered with True Fit, a platform that uses AI-powered machine learning and individual preferences to connect shoppers with the right sized clothes and shoes. Other retailers have certainly seen success with True Fit. According to the company, Moosejaw has seen a 24% reduction in size-related returns.

New solutions are also emerging. Reactive Reality has launched Pictofit – technology that enables shoppers to create an avatar that accurately reflects their exact body shape and measurements. As well as using the avatar in store – Hugo Boss was recently the first retailer to launch the try-on technology – customers can use it to try on and buy products online later.

Tackling serial returners with limited return windows

Fixing size and fit doesn’t remove the problem of the aforementioned ‘serial returner’, of course, which is a phrase coined to describe customers who order multiple items with the intention of sending them all back, perhaps after wearing them for one occasion only or on social media (when partaking in online ‘hauls’).

Asos has taken measures to deter serial returners, with the online retailer banning those who show signs of the behaviour, as well as only offering vouchers for refunds made between 28-45 days after purchase. Asos remains committed to free returns but issued a profit warning in June, saying returns had increased from March to April, and saw shares at a 12-year low this week.

Optimising reverse logistics

Reverse logistics refers to the moving of goods from customers back to the sellers or manufacturers. One way to do this is via in-store returns, which many omnichannel retailers including Zara and Uniqlo encourage. Not only does this help retailers get the item back into the sale system more quickly, but it also provides an additional sales opportunity for customers, as they have the chance to browse and shop while in-store.

Another way is via third-party return options, as not all retailers have a large or convenient store network. Companies like Happy Returns – which was acquired by PayPal in 2021 – aims to help retailers cut costs, enabling them to return items (without printing or packaging) to one of its 5,000+ ‘Return Bars’ in the US. TechCrunch reports that in-person returns at ‘Returns Bars’ were nearly four times greater in February 2022 than in February 2021, while the company has also doubled its retailer partners to include the likes of Everlane and Gymshark.

With online shopping rates now remaining steady (and higher than pre-pandemic), the issue of returns is unlikely to go away any time soon. So, while charges might be inevitable, retailers should not lose sight of the importance of customer experience, and enabling customers to buy the right item first time round.