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Retailers are starting to charge fees for returns



(Toronto) Clothing retailer H&M will soon begin testing fees for returning items in Europe. Uniqlo Canada already does this for returns of items purchased online. The same goes for Miniso’s Canadian stores, which treat most purchases as final sales.

It’s not the buyer’s imagination playing tricks on them. Some stores have indeed decided to make it more difficult and more expensive to return items, since consumers remain hooked on a great pandemic habit: online shopping.

Retailers are making these decisions because returns are expensive — and every dollar counts in a time when stores are still trying to recover from economic lockdowns and have to juggle supply chain issues, points out Sylvia Ng, chief of management of ReturnBear, a returns collection service operating at select Cadillac Fairview shopping centers.

Mme Ng says the pandemic has left some retailers struggling with return rates of around 20% or even 30% of items sold.

“In order for their inventory – and ultimately their business – to be profitable in this economic climate, I think it’s very important to look at returns,” she says. When it represents about 20% of the activity, you can’t afford not to do it. »

Although there is little Canadian data on the prevalence of returns, the country’s retail trends generally follow those of the United States, observes Prabhjot Gill, an associate partner at McKinsey & Co. who focuses on retail. detail.

Across the border, consumers returned US$428 billion worth of goods in 2020, with e-commerce responsible for at least a quarter of those returns, according to research by the National Retail Federation and Appriss, published in January 2021.

A McKinsey survey and discussions with approximately 35 North American retail executives in 2019 and 2020 revealed that 86% of respondents considered a lenient return policy essential to increasing revenue. In addition, returns were described as a “necessary evil” by 75% of respondents.

But there is a strong incentive to reduce returns. Stores face costly supply chain issues, rising material prices and sometimes an overabundance of inventory caused by curtailing consumer spending amid runaway inflation.

H&M’s rising raw material and shipping costs weighed on its latest quarter and helped its share price fall to its lowest level in 18 years.

The Swedish fashion giant is simultaneously set to test return shipping, although the company said in an email to The Canadian Press that testing was limited to Europe for now.

“But, of course, this is only an initiative to improve the situation,” assured its chief executive, Helena Helmersson, during a recent conference call to discuss the chain’s recent financial results. “There are several other things to do as well. »

Smaller return windows

One of them could be to shorten the return window, believes Lisa Hutcheson, managing partner at consultancy JC Williams Group.

“Before, we had 30 days,” she recalls. Some retailers had 60 days and now you see periods of 14 days or 21 days. »

This window is even narrower at Asian homeware company Miniso Canada.

Customers only have seven days to return online orders and must cover shipping costs and a 10% restocking fee if items are returned due to “personal preference”. In stores, “all items are final sale, except for defective electronics from the manufacturer,” the company’s website explains.

The rise in online sales, where it is difficult to predict whether a product is made of quality materials or to imagine what something will look like in one’s home or on one’s body, is partly responsible for the reduction in windows back.

McKinsey found that 70% of returns were due to poor fit or style, while the top two reasons for returns handled by ReturnBear are items that are the wrong size or differ from the photo or description.

To avoid disappointment, consumers often buy clothes in several sizes. There’s often no financial penalty for returning something that doesn’t fit, as many stores offer free shipping on returns or have multiple locations ready to take items back.

For customers, it doesn’t matter how long it takes to return the item, as long as they get a refund, but for retailers, it’s a big deal.

“These fast-fashion stores, like the folks at Zara and H&M, they rotate their inventory very quickly, so they’re going in and out of something in a matter of weeks at most,” Hutcheson.

“If something is lying on the floor at my house because I just didn’t have time to return it, they lose that opportunity to sell something at full price. »

Once an item has returned to a store or warehouse, it may be sent for clearance or even stored for next season. At that point, the lost sale or markdown, plus shipping and labor, created double the cost than if there had been no return, Gil.

Some stores want customers to help them reduce this burden. Uniqlo Canada’s website indicates that clothing purchased online or via click-and-collect service can only be returned by mail and a fee of $9.90 plus tax will apply. The company has not commented on the policy.

Zara charges a £1.95 fee on returns made to third-party drop-off points in the UK, but also would not comment on the situation.

While Mme Gill sees the value in reducing returns, she warns retailers of the dangers of passing the cost on to consumers.

“There are plenty of other retailers, often in the same space, offering free returns, so (those who charge for returns) run the risk of consumers going to someone else. »

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