A window of opportunity – Should retailers offer long or short return policies?
Over the last decade, retailers made return windows longer and longer. Much to the delight of consumers. This was compounded recently by the pandemic.
Through 2020 to now, ZigZag Global has recommended that retailers extend their returns policy to offset the lockdown-inspired uncertainty, logistical challenges from Brexit, and the overall boom in eCommerce with longer returns windows. Advice echoed by many industry experts. Increasing the returns policy window provided retailers and carriers alike with some breathing room.
Increasing the returns window was most certainly the best option for retailers during the pandemic due to possible delays and drop off and collection limitations. However, is it wise for retailers to consider offering an extended returns policy once the dust settles? ZigZag unpacks the returns window discussion.
What returns period are retailers obligated to offer?
Whilst there advertising a returns policy is not a requirement for an eCommerce business, shoppers do have rights. Regardless of what retailers offer on their website, the Consumer Rights Act 2015 and the Consumer Contracts Regulations protect the customers and provide a minimum returns window.
All consumers can cancel an order for a full refund 14 days from the day they receive the goods (not the order date). However, the refund only applies to the value spent on the product, and not delivery costs. The consumer then has 14 days after the point of notifying the retail of their intent to return, to get the goods back. For faulty goods, the law is similar, and allows consumers 30 days to return for a full refund.
Although not obligated to highlight a consumer’s rights for making a return they are bound to honour it by law. That means to avoid causing distrust amongst savvy, informed customers (a consumer profile rapidly expanding with online comparison websites and COVID-19 caused financial worries) retailers should at minimum advertise their consumers rights correctly. Returns are quickly becoming the most important aspect of customer experience. 79% of consumers will check the returns policy before purchasing, so not having one is eCommerce suicide.
The case for offering a short returns window
Fast Fashion needs faster returns
One of the most obvious reasons a retailer may want to keep a short returns window is to get goods back on the shelves faster. This rings especially true for the increasing amount of apparel brands that are starting to adopt the fast fashion business model which focusses on maintaining low production costs, high volumes, and short seasons.
Fast fashion items can be outdated in style within six weeks. This means for primarily fast fashion brands they need goods returned quickly so they have the best chance for resale at the highest price. Another selling point for shorter return windows is that it helps retailers better manage their stock. The sooner they know whether the product will be returned, sooner they can relay that information back down the supply chain, allowing them to make more informed decisions on production levels.
Less time for the fraudsters
Short return windows protect against intentional fraud. A 2019 survey from Checkpoint Systems revealed that around 20% of online customers will purchase a fashion item, wear it, and return it for a full refund. The ethically questionable process, coined as “wardrobing”, costs UK retailers £1.5bn. Whilst a data-analytics-driven platform such as ZigZag’s returns management solution is the best way of identifying serial returners and customers engaging in “wardrobing”, the next best solution is to reduce the returns window. Often a customer will wardrobe as a way of getting an outfit for a specific event or even a holiday, a shorter returns window makes planning for this more difficult.
Case for offering a mid-range 30-60 day returns window
Going above and beyond
According to the soon to be published ZigZag Retail Returns Report, 79% of consumers check the returns policy before purchasing. When coupled with the estimate that 92% people will shop again with that retailer if returns are easy (Invesprco) it shows the importance of making your returns policy attractive. Of course, giving shoppers more time to make a return is part of that process.
Time to benchmark
If you are unsure of the best approach when it comes to refining your returns policy, the best place to start is to examine what your key competitors are offering in your core markets. Perhaps consider other retailers that you admire, even if they are not in the same vertical, to see what you might emulate. ASOS, for example, extended their policy to 45 days but now offer credit rather than cash on returns over 30 days. If your competition is offering a short returns window, the 30-60-day option would work as a differentiator and can be marketed against.
Why would you want to panic your customers?
It can be argued that a short returns window may panic shoppers into returning too soon. The minimum returns period is just 14 days (for a consumer to notify a retailer of their intent) which, for salaried employees, may not even span over a paycheck. It is estimated that 50% of Britons and 78% of Americans are living paycheck to paycheck. Longer returns periods make it easier for consumers to justify items they are on the fence about, and the longer the window the more chance of them sticking with it in this scenario.
Case for offering a longer 60+ returns window
Returns are a commercial weapon
Positioning your returns policy as one of the most generous amongst your competitors has some obvious benefits. A far longer than necessary returns window signals to consumers that the retailer values customer satisfaction. Wunderman’s “Wantedness” study found that “The majority [79%] of consumers said that brands have to actually demonstrate that they understand and care about me before they are going to consider purchasing.” With consumerism emerging from a pandemic and social injustices coming to a head, the way brands treat their customers could become an increasingly important factor in winning and retaining customers. A longer returns window is definitely a good starting place for a company trying to put its customer first.
Can I speak to the manager please?
One of ZigZag’s top fashion brands was able to reduce their customer service enquiries by 40% when they switched to our returns management solution. This was achieved as customers received their refunds faster and were able to track their returns on their journey back to the retailer, eliminating the popular “Where’s my refund” and “Where’s my return” enquiries. Increasing your returns policy window would result in fewer consumers returning close to the deadline or panicking whether it made it back in time. A longer returns policy ultimately should lead to a reduction in customer service complaints, and thus a reduction in costs.
Kindness not just at Christmas
An extended returns window is considered best practice around peak season or during sales. It reduces the strain on a retailer’s warehouses and the overall logistics network. With a short window, there will be massive spikes in returns volumes a week or two after sales which could cause bottlenecks and delays in warehouse sorting processes. These delays are often passed on to customers through withheld refunds or out of stock signs on your website. Not ideal for winning or retaining customers.
Most retailers increase their returns policy window for peak season as a marketing tool. Superdry’s returns policy gave consumers over three months to make a return, John Lewis a 90-day window, and House of Fraser just over two months. Whilst it might be wise to leave some room in a returns window throughout the year so that the retailer can increase it for Christmas, and thus market it as a selling point, it could also be looked at favourably if the retailer offered it year-round.
So, what’s the perfect length for a returns policy?
The real question is this: does lengthening the returns window generate more sales than it loses in the cost of additional returns?
It is worth testing your returns policy to find the sweet spot. Although some fraud could be prevented with shorter windows, the minimal legal requirement is long enough for most to continue unencumbered by tight deadlines. Importantly, when retailers plot the returns per customer against net sales, they often find most valuable customers will still return frequently. So, changes that shorten returns windows may have a noticeable impact on your VIP customers. Discouraging 20% of fraudulent customers may not be worth losing 10% of your VIP customers. It is always beneficial to survey your shoppers in each market or talk to your best customers directly and see what improvements they think you should make.
On average, 95% of returns are made within 7 days anyway according to our own ZigZag research. It is widely accepted in the online retail industry that a more generous returns policy encourages shoppers to make a purchase. Crucially, it is also reported that this doesn’t necessarily lead to more returns.
At ZigZag, we suggest using a longer returns period. It encourages spending more than it does additional returning, eases the burden on customer services, increases customer satisfaction and loyalty, and keeps you competitive. A returns management system with an exchanges function, like ZigZag, will combat the drawbacks of getting goods back on the shelves faster and managing stock efficiently.