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Return to Sender: Retailers face a ‘Phantom Economy’ of £7bn each year as shopper returns continue to rise

Tue Jun 26 01:00:00 EDT 2018

  • We’re a nation of ‘serial returners’ as a quarter of retailers say they have seen an increase in returns over the last two years
  • Fashion retailers are particularly affected, with almost four in ten reporting that refunds have risen
  • One size doesn’t fit all, with consumers pointing to inconsistent sizing across brands as the main reason for returning clothing
  • Businesses are adapting in response, with three in ten increasing the price of items to cover the cost of managing and processing returns

UK shoppers are returning £7 billion* of purchases every year, leading to a ‘phantom economy’ of lost revenue for retailers, with sales coming in that they ultimately can’t recognise.

New research from Barclaycard, which processes nearly half of the nation’s credit and debit card transactions, reveals that a quarter of retailers (26 per cent) have seen a rise in returns in-store and online over the last two years, with the number of returned items up by 22 per cent on average**.

These figures are even higher among fashion, footwear and accessory retailers as consumers increasingly change their minds after making a purchase, with almost four in ten (37 per cent) of these businesses reporting that refunds have risen since 2016 **.

Inconsistent sizing driving ‘serial returners’ culture

Clothes shopping online is fuelling the rise of the ‘serial returner’, as almost half of the amount consumers spend ends up being refunded by retailers. While Brits splash out on average £313 on online clothes shopping each year, they actually end up sending back £146-worth of this (47 per cent). In fact, a third (33 per cent) of shoppers buy clothes online expecting that items will be unsuitable before they’ve even tried them on.

The number one reason given by shoppers for returning clothes is the variation in measurement which determines sizing in the UK – a current hot topic in the fashion retail industry. Two in five consumers (40 per cent) say they return clothing bought online because items don’t fit as they expect them to.

To combat the issue of inconsistent sizing across different brands, one in 10 (nine per cent) shoppers have taken to buying multiple sizes of the same item and returning those that don’t fit – a trend 27 per cent of retailers say they have identified.

In order to minimise returns, 36 per cent of shoppers are calling for brands to improve online size guidelines – with 35 per cent seeking the standardisation of sizing across retailers. A further 16 per cent would also like to see wider use of technology online, such as augmented reality, to help them visualise how products will look when worn.

Retailer coping strategies

Returning purchases is now simpler than ever: over half of Brits (52 per cent) think that retailers have made the returns process more convenient, while three in 10 (29 per cent) merchants say this is a direct cause of the rising serial returners trend. In fact, just over half (54 per cent) of retailers think that customers’ decisions about where to shop are now influenced by the vendor’s returns policy.

At the same time, merchants are looking at a variety of ways to tackle the growing volume of returns. The top 10 methods retailers have introduced to help combat the rise in returns are:

Action

Percentage of retailers who’ve taken this step

Provided more information about products online, e.g. exact measurements

52%

Made the returns policy more transparent e.g. making it more prominent on a website

48%

Increased the price of items to cover the cost of managing and processing returns

29%

Worked with a logistics provider to speed up the returns process

28%

Introduced a new system to handle returned stock that can’t be re-sold

26%

Ensured ‘quality purchases’ by limiting the options available to customers based on preferences

25%

Reduced the time customers have to return items to get a clearer picture of stock inventory

23%

Lengthened their returns policy

23%

Hired more employees to process and manage returns

20%

Introduced a ‘try before you buy’ service – allowing customers to only pay for items they decide to keep

18%

The cost of free returns to retailers

In addition to the potential revenue lost through the ‘phantom economy’, the majority of online retailers (55 per cent) also offer free returns which can come at a cost to their bottom line. Given that nearly seven in ten (69 per cent) consumers expect free returns ‘as standard’, it’s increasingly important for retailers to offer solutions that reduce the volume of returns they receive.

Perhaps counter-intuitively, however, many retailers see offering free returns as key to their customer experience, with two in five (41 per cent) considering free returns as one of their business’ strongest selling points. A further 37 per cent say providing free returns has led to increased customer satisfaction and 44 per cent feel they need to offer this service to keep up with the competition.

Konrad Kelling, Managing Director of Customer Solutions at Barclaycard, said:

“It’s clear having an effective and convenient returns policy that satisfies customer needs is a crucial factor of success for retailers. While many have adopted new processes to help manage increasing returns volumes, the real focus should be on measures which help to reduce over-ordering in the first place.

“Implementing technology such as virtual fitting rooms which allow shoppers to visualise how products will look when worn, for example, is one way retailers could reduce the number of returns and refunds they contend with, and in turn, the size of the ‘phantom economy’.”

Naomi Isted, Stylist, TV Presenter said:

“As a nation of clothes lovers, we’ve become accustomed to over-ordering and subsequently returning on mass clothes bought online. Today’s busy shopper often buys on the move and in a rush and it can be easy to forget that packaging up and returning items that aren’t right can be a time-consuming task.

“It may sound simple but my advice is to try and shop online in the same way as you would in-store and only buy clothes that you really want and ultimately, will wear. Rather than buying on impulse you should ask yourself if the purchase is really going to work in your wardrobe. Small steps like making ‘wish lists’, reviewing items more critically and avoiding styles you haven’t tried and tested before can help prevent the hassle of returning later.”

Notes to Editors

*£7,043,956,397. Figure calculated by multiplying the average value of purchases returned annually per person in this nationally representative survey, by the UK total population (18+). 

**Merchant research was conducted by Opinium surveying 302 UK retailers from 25/05/2018– 01/06/2018. Consumer research was conducted by Opinium surveying 2,002 adults (18+) from 25/05/2018 – 1/06/2018.

For more information, please contact Rebecca Butler at Barclaycard on Rebecca.butler@barclaycard.co.uk or 020 7116 1993.

About Barclaycard

Barclaycard, part of Barclays Bank PLC, is a leading global payment business that helps consumers, retailers and businesses to make and take payments flexibly, and to access short-term credit and point-of-sale finance. In 2017 we processed over £250bn in transactions globally. Barclaycard is a pioneer of new forms of payment and is at the forefront of developing viable contactless and mobile payment schemes for today and cutting-edge forms of payment for the future. We also partner with a wide range of organisations across the globe to offer their customers or members payment options and credit.

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