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Online Retailers Face Wave of Returns as High Cost of Living Squeezes Consumers

The new year has seen a surge of returns as cautious shoppers become more selective and cost-conscious, spelling trouble for online retailers

January saw a 20% rise in returns at ReBound, a firm which handles returns for retailers including Crocs and Helly Hansen.

With inflation at its highest in four decades, consumers are tightening their belts and focusing on essential purchases such as food and heating. As a result, more shoppers are returning goods to stores, and the high sales during the Christmas period may not be as significant as some observers had hoped.

This increase in returns is hitting retailers’ profits, as it leads to both lost revenue and increased costs of trying to resell returned items. The biggest driver of returns is ill-fitting clothing and footwear. Last year in the UK alone, £6bn worth of goods were returned, and this figure is predicted to rise to over £7bn by 2027.

Retailers are starting to introduce charges for returning online purchases, with UK fashion chain New Look joining Zara and Boohoo in implementing this policy. However, some companies such as Asos are still offering free returns, as the company stocks over 850 brands, and sizing can be unpredictable for consumers.

The pandemic has also contributed to the rise in returns, with lockdowns causing clothing purchases to shift towards loungewear, which doesn’t require an accurate fit. As consumers return to work and events, and household bills rise, they are demanding more from their outfits.

This problem is contributing to mountains of goods being left to rot in landfill, with only 75% of returned products being resold. GXO Logistics, a warehouse provider, is helping retailers to resell returned items by re-labelling, cleaning, and fixing broken products. They have used technology and warehouse logistics to lower the threshold for viable resale from £25 to £7.

Amazon and Target are taking a different approach, allowing customers to keep low-value goods and receive a full refund to avoid the cost of returning the item. The rise in returns highlights how consumers are being squeezed by the high cost of living and how retailers must adapt to stay competitive.

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