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Should H&M Have Joined the Bandwagon Exiting Free Online Returns?
H&M has become the latest fashion retailer in the United Kingdom to charge to return online purchases amid a broader push across retail to tackle escalating return costs.
The world’s second-biggest fashion retailer told The Guardian it began charging customers £1.99 for each returned package in the U.K. this summer, joining rivals like Zara, New Look, Uniqlo, and Next.
“H&M’s online returns policy varies from market to market,” the Swedish retailer said in a statement to Fortune. “We strive to help our customers find the right size and fit from the outset, in order to reduce the returns rate.”
“It’s a sensible thing to be doing,” Jonathan De Mello, founder of the consultancy JDM Retail, told the BBC. “It makes economic sense, as it discourages shoppers from bulk buying online products and then returning the majority of them. That’s been a real problem for companies.”
In the U.S., H&M has been charging $5.99 for online returns, although they’re free for members of the chain’s free membership program.
Other brands charging for mailed returns in the U.S. include:
- Uniqlo charges $7
- Urban Outfitters charges $5
- Foot Locker charges $6.99
- J.Crew charges $7.50
- L.L.Bean charges $6.50
- JCPenney charges $8
- Zara charges $3.95
- REI charges $5.99
Additionally, Kohl’s and Belk customers are responsible for their own return shipping costs.
Those still covering shipping for online returns include many prominent names, such as Target, Walmart, Best Buy, Nordstrom, Lowe’s, Costco, Sephora, Apple, and Gap. Free returns, while costly, remove a barrier to making an online purchase.
Macy’s return shipping costs are free for Star Reward members and $9.99 for non-members.
In April, Amazon reportedly began charging a $1.50 fee when some customers drop off product returns at a UPS location instead of a nearby Amazon Fresh, Kohl’s, or Whole Foods. On its returns website page, Amazon states, “All return-eligible items, weighing under 50 lbs and sold by Amazon, have at least one free return option.”
In 2022, returns cost retailers about $816 billion in lost sales, according to the National Retail Federation’s annual study, with the average rate of return remaining flat at 16.5% compared with 16.6% in 2021.
Beyond charging for the shipping costs, retailers are also offsetting the cost of returns by shortening return windows, partnering with return aggregation services like Happy Returns and Narvar, increasing free shipping thresholds to eliminate impulse purchases, and using fit technology to reduce sizing errors.
A PowerReviews survey of over 9,000 U.S. adults fielded in November 2022 found that “87% of consumers would be at least a little likely to stop shopping with a brand or retailer that stopped offering free returns; 39% would be very likely to do so.”
Discussion Questions
Has it become more evident that charging for shipping has to be a primary way to reduce the cost of returns? How high is the risk of online cart abandonment without free shipping?
Poll
Loading …BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Lisa Goller
B2B Content Strategist
Returns are part of the cost of doing business online. The problem is that the costs of servicing online are not always passed across to the consumer in full. With profits under pressure, many retailers are now trying to correct this. As would be expected, however, consumers do not like change which costs them money. H&M’s mistake was to originally say they would charge £1.99 for online orders returned to store. This is harsh as very few retailers charge for store returns, and the company has since had to backtrack. Now H&M is facing a backlash as some consumers are saying they make returns because the company’s sizing is very inconsistent. All of this highlights what a complex and contentious issue this is.
I think charging for returns has to be reducing sales. More importantly, what does it do to lifetime value? Are we creating a negative interaction that causes us to lose our best customers? The article above mentions statistics that I believe may be a mix of online and in-store sales—for online returns, rates are much higher than 16%. The cost of returns needs to be a shared burden, but putting it all on the customer is a risky business.
Now, cutting the habit of bracketing (buying multiple sizes to get one that fits) has to be stopped somehow. One approach might be to charge a nominal fee for items that are identical except for size. But this would certainly reduce sales. Not good. A better way to reduce bracketing is by improving online size and fit, and this tech is available today. One tool even uses UGC (user-generated content) from social media which has the added bonus of helping increase engagement. In other words, focus on getting shoppers to buy what they’ll keep.
Free shippping is still a major driver for purchase conversion. Like most pricing challenges, however, retailers do need to weigh profit and loss. Unified commerce is calling for retailers to think differently as every channel is important to the mix. The path forward may be as easy ast .95 vs .99, finding a way to embed the fees so that the customer can still enjoy the ease of returns.
Apparel returns will always be an issue as long as sizes remain unpredictable. Charging for returns doesn’t address the problem of customers attempting to find the correct size. We really need to come together as an industry to think about ways to improve this.
Before we order from a new retailer, we go right to the return rules. Like the 39%, we never buy if there are return fees. That is the retailers’ loss…a sale they never make or even multiple sales they may make in the future.
The message that comes with charging for returns is if there is a mistake in size, quality, description, et. al., it is your fault for buying it. It is never our fault for your disappointment.
The problem in the cost of return analysis is that we always talk about covering the return cost of that single item. We never considered sharing that cost among the other ten things bought and never returned. Free returns are part of the product offering and should be measured as such.
It is an understatement to say that online shopping is a huge convenience for everybody. Shoppers experience significant savings in time and money. What is so outrageous about charging nominal fees for that convenience? Especially now that abuse of the system has become a black hole of unprofitability? Amazon used ‘free’ shipping and returns as the greatest customer acquisition tool in the history of retail. And most of the market had little choice but to follow suit. And now the playing field needs a reset. Ecommerce has to find a way to be profitable, and return fees are a healthy and appropriate step in that direction.
People don’t realize that it’s not just the cost of the return shipping. It’s the handling, reprocessing, repackaging of the returned item to hopefully make it saleable again, probably at less than full margin. The status quo of free returns is not sustainable.
Return fees, virtual try-ons and stricter return policies are top ways retailers deter costly returns and bracketing.
Charging for returns raises the risk of cart abandonment, as consumers have come to expect it. Free returns are a powerful differentiator in e-commerce, especially in apparel.
Yes, returns are part of the cost of doing business on-line and they keep increasing on a per unit basis for retailers. However, leading retailers have invested significantly in getting consistency in their product sizing to help reduce the trend of consumers buying two or three of the same product in different sizes. Part of their long-term goal, in addition to customer satisfaction, is in reducing returns. However, most of these company’s also wave shipping fees when a customer spends over X; which encourages the continued consumer habit of purchasing multiple units in different size. This puts retailers whose product lines are size dependent are in a catch 22 on the purchasing side of the transaction. For other than the highest end retailers we will probably continue to see in increase in return fees in the future as it is less impactful to the customer than raising shipping fees on the purchases.
Product returns are an integral part of the retail experience, and they’re not going away. Consumers have adapted to the changing landscape and will immediately gravitate to a retailer or brand’s return policies before deciding to shop with them. However, there is no such thing as free shipping or free returns. The associated costs are either integrated within the product pricing or as an added-on benefit of joining a premium loyalty program such as what Macy’s is offering with their $9.99 Star Rewards program.
H&M will have to take a firm stance on their strategies for online product returns. Considering the sheer transactional sales volume that H&M volume generates daily, there should be one consistent strategy on whether there is a cost associated with product returns.
Part of the challenge is that H&M and other retailers should invest in capabilities and innovations to gain insights into their consumers and in right-sizing technologies to guide customers on the front end. This will help to mitigate returns and bracketing https://www.smithcorona.com/blog/how-bracketing-changed-retail-returns/ but will not eliminate product returns.
My answer (to the Poll question specifically) comes with an asterisk: I strongly encourage rational return policies, but that doesn’t necessarily translate into any one specific recommendation. FTR, I think return fees are likely to be part of such policies, but the bigger point is there are a multitude of issues one needs to address…it’s not a “one and done” decision.
Precisely. Instead of talking about the reasons for return…the answer always seems to be charge .
Like the cat that tasted fresh tuna, there’s no going back to the canned version. Problem is that the final mile has related costs both outgoing & return shipping. The outgoing segment has been somewhat addressed by memberships or minimum order sizes.
These same two variables could be employed to address the customer’s concern for retail mandated return fees. Make free returns part of a membership program (with higher membership fees) or free as a function of the size of the order or the extent of the continuity of purchases by customers. Both of these options are examples of embedded versus individual costs to return merchandise.
Charge customer return shipping at your own risk. Many customers are now conditioned, with an expectation this cost is built into the cost of the operations.
One aspect of the returns processed mentioned many times before is the fact that clothing sizing isn’t uniform or consistent enough by brand or retailer to earn customers confidence. Is this the customers fault? Are they supposed to be penalized for not understanding how the clothes were constructed? Likely, the retailer not do enough to describe the item, to help customers fit their body type, or do enough to help them imagine how the color, material looks. This is the cost of doing business online compared to in store shopping.