New research found that shoppers may even turn their backs on retailers if they are forced to deal with more stringent return policies, with UK retailers potentially losing billions of pounds of sales each year if they continue to do so.
Logistics technology firm Locus is warning that up to £34.1 billion in retail sales may be lost, as shoppers cut back after the implementation of penalties for returns, and more stringent conditions.
The results come at a tough time for the retail industry, as consumer confidence remains fragile, operating costs continue to increase and pressure on profit margins is a concern.
The data from the Office for National Statistics shows that the UK spent about £57.8 billion on textiles, clothing and footwear in the last year. If retailers keep taking steps to minimize returns cost, a major portion of that expenditure may be impacted, Locus said.
According to the study, which surveyed 2,000 UK consumers, 59 per cent would be less likely to purchase from a retailer that implemented stricter returns policy or introduced return fees. Over half (56 per cent) indicated that they would go elsewhere if they experienced such changes.
The study also contradicts the notion that return charges dissuade customers from holding on to products that they don’t want. If a fee was made, only 38 per cent of respondents indicated that they would keep the product instead of returning it. Meanwhile, 20% of shoppers stated that they expect or intend to return products for most of their online orders.
The results coincide with a number of fashion brands taking steps to reduce the cost of returns by implementing stricter policies. To safeguard profitability, companies have implemented shorter return periods and extra fees and stipulations for repeat returners.
Retailers are in a very tough situation in balancing the costs and keeping customers satisfied, said Locus Chief Revenue Officer Subhro Chakraborty.
“Retailers today have to deal with returns, which is one of the most complex challenges that they’ve got.” Chakraborty said. There’s a good reason to want to cut down on return costs, but over-restrictive policies can have a negative impact at an important point in the customer journey.
He said they need to concentrate on minimizing avoidable returns rather than fining the customers. However, more accurate product descriptions, enhanced sizing details, more robust inventory management and more efficient fulfilment processes could help ensure that consumers make more savvy buying decisions.
A growing number of retailers are using technology and data-driven solutions to maintain profitability while not harming customer loyalty, industry experts say.
Although return fees may save money in the short term, it could be a deterrent for people to buy things and effect the customer relationship in the long run, the report indicates. If it’s an industry that has to be profitable on every sale, then the £34.1 billion of spending that’s up for grabs should be a reminder that the shopping experience could be more important than making it tougher to return.