Next to end ‘free’ returns and charge £1 per collection
Fashion retailer Next have broken ranks with other retailers in what might signify the end of the free returns mantra. According to Drapers, they will start to charge £1 for each time a courier is used to return items – previously returns for account customers were charged at £3.99 but the delivery charge would be refunded if the entire order was returned.
Next customers will be able to avoid the new £1 charge if they take unwanted items to a Next store to return them rather than using a courier or myHermes ParcelShop.
The law says that retailers must refund the entire payment if an order is returned for a change of heart, including the original delivery charge (but not necessarily any upgrades for expedited shipping). There is nothing to stop a retailer making a charge to cover the cost of returns shipping which can either be paid up front by the customer or (no more than) the actual cost can be deducted from the refund amount.
Currently across the whole online retail industry, free returns has been touted as beneficial as it gives an incremental increase in sales. In the fashion vertical returns are traditionally exceptionally high (they can be anything up to 40%) and making a charge, however small, is likely to make a material difference to Next’s bottom line profitability.
Shares in Next have seen a bump this month after the company upped their guidance for the year. Sales for the past quarter to the 7th of May were up 6% year on year with online up 18.1%. However their store sales, as is most of the High Street were down – in Next’s case by -4.8%. With online being the strong performer, it shouldn’t be a surprise to see Next taking a hard look at costs and deciding that returns are an overhead where costs can be cut by charging customers.
What will be interesting to see is if other retailers follow suit and start charging courier costs for returns instead of offering a free service. If there is an industry wide change, marketplace could also potentially follow suit an lower their uplift in search for merchants who offer free returns.