Extended returns policies: weighing up the pros and cons
As more and more retailers respond to the COVID-19 pandemic with extended returns policies, Kooomo analyses the impact this is likely to have
The retail industry is one of the hardest hit sectors by the coronavirus outbreak, with retailers forced to make critical decisions over a very short space of time and the knock-on effect expected to be seen for years to come. As more retailers announce extensions to their returns policies to help customers adapt to the situation, digital commerce solutions specialist, Kooomo outlines that while there will be pros and cons to this strategy, it will largely result in a more loyal customer base.
A few examples include H&M extending its return policy from 28 days to 100 days for both in-store and online purchases and New Look extending its returns period to 90 days. Additionally, TK Maxx states that if a customer is unable to return an item within the usual 28-day window due to store closures, it will accept returns for 30 days from when its stores re-open.
Ciaran Bollard, CEO, Kooomo says “Although this is great for consumers, the strategy could have implications for retailers by affecting accurate conversion rates, profit margins and incurring a lot of unsustainable waste. It will therefore be crucial that retailers regain control of this area when normality returns.”
In general, returns can skew the profit projections of a retail business as products that would otherwise be available are removed from inventories, creating shortages. Returns, especially when made to online retailers are unlikely to be deemed fit for resales and results in a negative cash flow as well as having a surplus of useless units. Clothing in particular is often superseded by next season’s range, having little or no “salvage value”. Typically, anything less than the original condition will need to be sold at a discount and the increase in waste can result in a negative effect on business’ environmental responsibilities.
Additionally, the time of year is less than favourable as we approach the change in the seasons. Ciaran adds, “As consumers typically begin to stock up on holiday clothing essentials, we may see a surplus of summer clothing that retailers will find difficult to shift in the winter months – hopefully when some normality has been restored.”
Ciaran adds that while extending a returns policy may sound like a difficult decision for retailers, there are many positives that can result from these extensions. “The coronavirus pandemic has forced retailers to reassess their returns systems and adapt accordingly, as online returns can be easily made in-store, but the reverse may not be necessarily true for instore returns online. This is an opportunity for retailers to reconcile their store systems with their online systems to ensure that the processes can save retailers time and manpower when they are issuing returns. When normality resumes and people return to the high street, in-store returns will help to reduce shipping fees and it will offer retailers the opportunity to generate more sales from their physical store.”
Ciaran concludes, “It’s important to remember that over half your customer base will appreciate any flexibility with returns policies and for now, extending returns policies will be much more beneficial to retailers in the long term. Having generous policies will likely result in fewer customer losses and churn. Consumers themselves are going through a difficult period and will likely remember the businesses who made their lives that little less so.”