What Zara and H&M Are Getting Wrong About Charging for Returns

If declining sales and the continued stress to keep bottom lines healthy were not enough pressure already, retailers are today faced with another key challenge — the rising cost of offering free returns.

There is no doubt that enabling a seamless and free returns experience can mean bringing in new customers, increasing AOV, sales and creating repeat customers. But, at the same time, it can also be the bane of a retailer’s existence. After all, returns are cost-intensive and can be a true logistical nightmare, increase fraud and cause a dent in profits.

A recent NRF survey found that for every $1 billion in sales, the average retailer incurs $165 million in merchandise returns. To top that off, retailers lose $10.40 to return fraud for every $100 in accepted returned merchandise.

It is perhaps not surprising that some retailers have had it. In September 2022, H&M started charging for online returns, following in Zara’s footsteps. The decision came after a disappointing quarterly report that sent the company’s share price plunging close to an 18-year low.

Charging for returns might make economic sense, but it is worth remembering that consumers still expect a frictionless experience, from pre-purchase to post-purchase.

In fact, 96% of shoppers review return policies before making a purchase, and 54% indicate that they were unlikely to purchase from a retailer that did not provide free returns. Furthermore, according to the PYMNTS Global Digital Shopping Index, U.S. shoppers who use these easy return options are 52% more satisfied than those who do not.

Fortunately, the vast majority of retailers realize this as they see offering seamless returns as a way to boost loyalty.

Revolve, FWRD and Net-a-Porter, for example, are some of the many eTailers that not only offer free returns on unworn products but even provide a pre-printed return label in the box. Meanwhile, other retailers like Athleta and Sephora are taking their return policies a step further. Athleta’s return policy includes a Give-It-A-Workout Guarantee, which means customers can work out in their apparel and still return the products within 60 days of the ship date if they are not satisfied. And Sephora allows customers to return new or gently used products for a full refund if returned within 30 days of purchase.

The lesson here is that instead of fearing costs and abuse of return policies, retailers must see easy returns as an opportunity for driving customer loyalty, increasing repeat business and upping overall sales.

By offering an easy and hassle-free returns policy, retailers can increase their customers’ confidence in making a purchase, knowing that they have the option to return the product if it doesn’t meet their expectations. This can ultimately lead to more sales and a reduction in abandoned carts, which can help move inventory.

To sum it up, an easy returns experience is not just a key component of shoppers’ post-purchase experience, but also, their pre-purchase experience. It is the ultimate answer to helping customers shop with more confidence.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.