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Retail returns in light of COVID-19

31 July 2020

Many retail businesses have reopened/are preparing to reopen as the Covid-19 lockdown eases. Whilst retailers hope that sales will surge as consumers rush to the shops that they have been unable to visit since March, some fear that a large percentage of transactions will be returns of goods purchased pre-lockdown.

Why does it matter?

The impact of lockdown on the retail industry has been significant, with the closure of retail businesses leading to a dramatic decline in sales; according to Retail Gazette UK retail sales fell 18.1% in April compared with the previous month and it is estimated that lost sales for non-food retailers amount to £1.8bn.

Despite store re-openings, some fear that profits will continue to suffer because a large percentage of people visiting re-opened retailers will be so-called ‘reverse buyers’, returning goods that they purchased pre- lockdown. Some of these returns will likely be usual returns of ill-fitting clothing. However, it is also likely that retailers will see returns of purchases that have been rendered unnecessary by lockdown, such as new clothes for cancelled holidays. It is also possible that customers will seek refunds for now unwanted impulse purchases made whilst stuck at home.

In fact, an increase in the cost of refunds has already been seen in the travel industry, with Ryanair processing 10 million a month, 1,000 times its normal level.

An increase in post-lockdown returns will be facilitated by the extensions to normal returns periods that many e-commerce and brick-and-mortar retailers have implemented in an attempt to mitigate COVID-19 related financial losses, by encouraging customers to shop online. Even if safety concerns prevent some customers from returning to shops as soon as they reopen, returns policies of up to 100 days are being seen, which will give significant time to obtain a refund.

In addition, many fashion retailers are looking to reduce the handling of items by staff by closing fitting rooms, as has been the approach in other countries. This increases the likelihood of customers purchasing items that do not fit and will subsequently be returned.

What action should I consider?

1. Double check your returns policy and consider whether it is fit for purpose in the current climate – is any extended return period still appropriate?

2. Ensure that staff (particularly at point of sale and customer services) are up to speed on any changes to your returns policy and the criteria for accepting returns from a customer.

3. Consider any additional measure which could be implemented to mitigate against increased returns. For example, providing in-depth size guides to customers in stores where changing rooms are closed.

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