Faced with inflation and declining margins, some brands have ended free returns. A cost-cutting strategy that not all retailers will be able to follow.
Zara and H&M have ended their free returns policy. As of April 28, 2022, returning to a relay point is charged €1.95 at Zara and will be deducted from the refunded amount. At H&M the refund is 0.95 euros for non-members. Does the policy reversal of these two apparel giants mark the end of free returns? With the increase in online sales, return rates have exploded among retailers. A June 2 Statista study estimates that 39% of internet users have returned a purchase in the last 12 months in France, compared to 49% in the US and UK, 51% in Germany, and 66% in China. According to the National Retail Federation, this expense with reverse logistics could reach up to 604 billion dollars for retailers by 2025. “In fashion, the problem is specific, says Vincent Torres, CEO of Revers.io, a platform specialized in -sale . For certain customer profiles, the return rate is up to 70%, given that the average cost of a return is 10 euros. The average bounce rate in fashion is around 30%.” So, in the face of exploding rates of return, retailers have every interest in arming themselves to limit them, while the Agec law requires unsold non-food items to no longer be destroyed since 1er January 2022.
The actual cost of returning
It makes sense to question free returns in the face of inflation and falling margins
Initially, free returns were seen as a form of security to encourage customers to buy online. “Free returns were one of the last brakes on e-commerce, before that there were payment problems and very slow delivery”, explains Vincent Torres. Marketplaces like Amazon quickly understood this and broke the sales block by offering free returns. Brands have aligned themselves with this principle by offering the same thing. “Now that customers are reassured, it makes sense to question free returns in the face of inflation, margin absorption and the ecological impact of returns,” says Vincent Torres. Especially since the return weighs so heavily on the environment, “on the one hand there is the cost of transport and on the other the fact of not being able to put the product back in a traditional sales channel. losses, as well as the return, which will be worse, as the customer himself will have repackaged the product”, explains the CEO of Revers.io.
a matter of sizes
On the marketplace side, everything is also done to limit returns. Zalando has tools to recommend the best size for the customer, based on previous purchases and product feedback. “We have a dedicated team that works to constantly improve our sizing advice,” explains Laura Toledano, General Manager of Zalando in France. compared to 6.8% at the beginning of 2020. […] Our satisfaction rate is over 80%, which shows that this is a problem that we must deal with and that we are moving in the right direction”, he continues. In the clothing brand Etam, the limitation returns, by directing the customer to the right size is also taken seriously.” “We don’t have a store in the United States and we are working there with Nordstrom”, explains Martin Souriau, Etam’s e-commerce director. The return rate we see on our website is lower than on Nordstrom. correct purchases to our customers so that the footing is good”, he believes.
The prerogative of marketplaces
General Manager of Zalando França, she believes that the end of free returns is not on the agenda. “Free returns are an integral part of our service promise to our customers. Our goal is to provide customers with the most enjoyable shopping experience possible by bringing the fitting room into their home,” she says. The marketplace offers a try now buy later service, which gives customers the opportunity to try on clothes before being charged the price, a measure “appreciated by Zalando’s customers in the current economic context”, says Laura Toledano. This type of service has given consumers certain habits, however, “even for a pure player, the return is complicated and expensive, since everything is done by transport”, says Vincent Torres, CEO of Revers.io. return, will be risky for selective distribution and nearly impossible for general distribution,” he continues.
A drive-to-store strategy
If there is an economic issue behind the end of free returns to drop-off points, that could also mask a drive-to-store strategy as traffic continues to drop to stores. Martin Souriau, director of e-commerce at Etam, has a negative view of free returns at delivery points: “We are promoting free returns in stores because it will allow us to personalize the customer experience thanks to our suppliers”, he explains. Vincent Torres also sees this as a way to encourage in-store traffic and leverage customer input to encourage them to buy other pieces. To find out which strategy hides the end of free returns, “it will be a matter of observing if pure players are also starting to charge for the returns and, therefore, if the objective of this strategy was really to reduce costs”, he concludes.