What: Returns in e-commerce are killing the retailer margin, and many operators think that they have gone too far in facilitating customers’ lives at no cost.

Why it is important: E-tailers are now starting to follow the example set by many brick-and-mortar operators and charge for returns. This might help change customers mindset and habits, but for the good or the worse?

In the fashion industry, implementing paid e-commerce returns has become necessary for some players since the Covid-19 pandemic. In France and the UK, where respectively 21% and 33% of fashion sales were made online in 2021, return rates were around 20/30% before Covid while Germany was already around 50% due to its historical culture of mail order. Today, return rates in Germany have hardly increased but exploded in France and the UK, where they have increased by 10 to 15 points compared to 2019. This increase in returns is also linked to a change in the categories of products (fashion is more size-sensitive than joggings).

This change in policy comes at a time when online fashion sales are slowing down, as with Boohoo and Asos. The costs are such that for low-value items, it is less costly for the e-commerce company to offer the item rather than proceed with a free return. A majority of Shein returns end up in landfill. This is also the case with Amazon.

If they decide to ask for payment to return goods, some retailers highlight the environmental argument, so that the billing will be less painfully perceived by their customers. But for retailers like Uniqlo, Zara, H&M and Etam, who have both physical stores and an online presence, charging customers for returns seem to be a profitable strategy. Due to their physical stores, they can offer a free alternative: returning the item in-store, which generates foot traffic. This is crucial at a time when in-store traffic is continuously decreasing, plus obviously generates additional sales (between 40% and 60% of consumers leave the store with additional items).

Anyways, the equation does not work. In Europe, the average cost of returns charged to customers is on average between €3 and €5. In France, the average is €3, with variations: the cost of a return is €0.95 at H&M and €5.99 at Levi's. According to a Sendcloud study conducted among 10,000 European consumers in 2022, for an order of €15, customers are willing to pay €2.90 in return fees. This is far from covering the actual costs (€6 to €7).

In spite of all this, e-retailers are starting to follow suit: Boohoo now charges €3 for returns, and it is expected that Asos will also change its policy as sales are slowing down.

Pure Players are increasingly asking customers to pay for returning products (IN FRENCH)