The announcement that Zara has started charging customers £1.95 for returning items bought online has caused a stir within retail. However, with inflation at an all time high and supply chain shortages challenging the industry, Zara’s announcement is brave and not unexpected by retail experts.
Given the aforementioned issues alongside increased labour shortages and fuel surcharges, it is understandable that retailers would need to find a way to recoup some of the costs. Returns was an obvious starting point, considering the behavioural changes brought about by the pandemic, online returns have significantly increased and are costing retailers significantly. Zara has set a precedent with their policy. The question is, will other retailers follow suit?
The nature of ‘free returns’
The frequency of returns has increased significantly with shoppers unable to try items on in some stores due to Covid policies. As such, online baskets are regularly filled with the same items, in different sizes and colours. This is particularly true amongst younger generations which has seen an increase from 33 to 41% since the pandemic.
Whilst the problem often lies in the disparity of retailer’s sizing guides and the lack of clear guidance when shopping online, the cost to restock, repack, post and sanitise returned items is turning into a retail nightmare.
Consumers have been spoiled with free returns for a number of years despite there obviously being no such thing as a ‘free’ return. It is a double edged sword in the sense that often these hidden costs wipe out profit margins for retailers and are also environmentally unsustainable.
When it comes to returning merchandise online, it is important that retailers and customers alike recognise their behaviour to make returning items streamlined and sustainable for the future of ecommerce.
Walking the tightrope
Customers are becoming more aware of the part they play in the returns journey. There is a general wish for online returns to become more sustainable. For this to happen, retailers have a duty to educate customers on their website through pop-up messages or targeted information passed on to the customer at the time of purchase.
There is a fine line to tread. Whilst retailers should subtly educate valuable customers of the brand to behave responsibly in regard to the environment, they need to be careful to not hinder the customer during the purchasing process. A good returns policy is critical for conversion, and over 70% of consumers now check the returns policy before making a purchase.
Retailers freed to charge for returns
I expect others to follow in Zara’s footsteps, particularly retailers that want to shape up their returns policy to include both paid and free returns. Nobody wants to jump first, so it is a particular challenge for a retailer to be a trendsetter in what could be deemed a negative customer impact. Thus, it is a bold move by Zara, but one that I respect and support.
I expect retailers to explore other options to give consumers choice, and that will likely be a combination of free and paid returns such as free exchanges, paid refunds or refund as a gift card. I expect this combination to be a mainstay of returns policies in the coming months and years.
It is important to note that not all customers expect free returns. It is the US, UK and Germany that lead the way in predominantly free returns for customers, a charge that has been led by major retailers like Amazon and Zalando. If retailers and customers can adopt multifaceted policies in other countries, I see no reason as to why this cannot work in Britain.
Return to the highstreet?
There is obviously a big push from Zara to get customers back into highstreet stores and it will inevitably work for some customers. Yet, for the subset of those who cannot drive or access stores close to home, home delivery (and home collection for returns) remains the easiest option. These are the customers that may think twice from purchasing from a retailer that does not offer free returns. Younger shoppers who cannot drive for instance, rely on home delivery.
For pure play online retailers, like ASOS, it is difficult to adopt this stance without the benefit of offering a store network. Next, for example, charge customers for returns through Collect Plus but are not charging for a store refund. Zara, in this sense, is following suit.
It reveals the difficulties in implementing consistent policies as pure play online retailers do not have the benefit of offering store refunds for online purchases.
The future of returns
Free returns are certainly not dead. There is a place for them in certain circumstances, be that subscription-based or promotional opportunities.
But the tide on returns policies is beginning to turn. Brexit has taught us that we are in for a long haul regarding labour shortages, increasing costs and mounting inflation that doesn’t look like changing.
The challenge for retailers is to manage those costs carefully. If retailers start charging for returns, the process for customers has to be a seamless returns experience through choice over a number of different home collection or drop-off solutions. Extra tools around paperless returns, exchanges and refund to gift card options should be implemented to provide value for money to loyal customers.