Zara may be changing the parameters of eCommerce returns for apparel retailers.
The company announced in May that U.K. customers will now be charged 1.95 pounds, or about $2.45, for customers to return online purchases to third-party drop-off points. Customers are still able to return online purchases at any Zara store in the U.K. free of charge.
The returns system is already in place for Zara in other European markets, including Belgium and the Netherlands, but most e-commerce shoppers opt to complete their returns in stores. It’s unclear if the charge is going to come to the U.S., as the decision is made on a market-by-market basis.
Charging a fee for returns is not new and is seen sometimes with products like electronics, according to Mehmet Altug, associate professor of operations management at the School of Business at George Mason University. “From a return volume perspective, it’s a good thing. But, on the other hand, from a profitability perspective, it has implications. One has to be careful with the price, the demand competition … From a profitability perspective if you’re the only retailer doing that in your sector, in your industry, then you might start to face some demand issues. Customers may start to go to another retailer.”
As retailers navigate high return rates and thinner margins due to supply chain pressures, will it become the norm to charge for returns?
eCommerce in the U.S. grew 30% in 2020, which is the fastest growth rate since 2002, according to Forrester. During that time, clothing, accessories, and footwear as a group accounted for 19% of all U.S. eCommerce sales growth. Forrester projects that digital sales in the clothing category will reach 47.5% by 2024.
However, retailers have a problem when it comes to eCommerce, specifically when it comes to apparel and footwear, and that is returned. Last year, shoppers were expected to return over $761 billion in merchandise, with about $218 billion coming from online purchases, according to the National Retail Federation. The category with one of the highest return rates? Clothing.
And while retail’s response to returns historically has been to make it as easy as possible for shoppers, that may be changing. Especially as companies are currently taking a hit on margins due to increased fuel, materials, and other supply chain costs.