Sam Sturgeon is head of marketing sciences at Hall & Partners. In this article he explains how retailers who need to charge for returns can predict customer reactions
The cost of processing online order returns for retailers continues to rise. Facing their own cost of living crisis with increased shipping costs as well as the labour required to process returns and manage fraudulent claims, many retailers have decided that they can no longer foot the bill for free returns.
Consumers of course have a right to return goods bought online, but it is up to the retailer if they charge extra for the service. Stores from Abercrombie & Fitch and BooHoo to New Look and Zara are now charging shoppers to return goods.
Tipping point for returns
Continous returns by consumers has created a tipping point that will impact the cost of online ordering for everyone. It won’t be the first time that the bad behaviour of some has resulted in increased costs for everyone. Travellers had got into the habit of reserving multiple rooms and then cancelling what they didn’t want at the last minute. Unfortunately this meant that some hotels were left with empty rooms. Now everyone in the travel sector charges a premium for the convenience of cancellation.
The environmental consideration
People don’t always consider the full consequences of their actions. Hotels with empty rooms can have a devastating impact.
Likewise, shoppers don’t always see the unintended consequences straight away. Take my Generation Z daughter as an example. She is outwardly critical of the damaging impact that fast fashion has on the planet as are many of her generation. When I pointed out that her ‘life hack’ for the high school dance – ordering a number of dresses and sending back the ones she liked the least – was also having an impact on the environment, she was surprised and upset. The convenience of multiple deliveries may be free, but ultimately the planet pays.
Of course, consumers do want to act in a way that is more responsible. Retailers, looking for ways to offset the environmental and social impact of their business, in addition to recouping some of the cost of this convenience, are more directly alerting customers of the consequences.
To charge or not to charge; that is the question
Charging for returns can result in increased consideration about the purchase, limiting the possibility of a return, but also potentially impacting sought after sales. Getting this balance right and then deciding how much to charge can be challenging when consumers still place high value on convenience.
Thankfully AI and research algorithms can help us determine the price consumers put on having access to free returns as well as the price threshold where the additional cost may result in them choosing not to buy at all. We don’t need to guess what the impact might be.
Marketers who are feeling the pressure to raise prices will be conscious about the impact this has on their brand perception as well as the overall shopping experience.
It will take a while for consumers to adapt to the fact there is no such thing as free returns and that someone must pay the costs somewhere in the value chain.
Consumer research will help retailers to understand the trade offs. Is convenience and cost more important than acting sustainably for example? The approach will be different across brands and categories. Further, a lot will depend on how price elastic the brand is. The less elastic the brand, the less likely they may be to switch. But they may still think twice about purchasing multiple sizes.
Retailers are also making it easier for shoppers to get their orders right first time; directing them to onsite apps to check sizing for example can go a long way to reducing the likelihood of a return being needed at all. Such behaviour shows consumers that the retailer cares about their environmental impact.
Communication about charging should be carefully crafted. Retailers may want to emphasise that charging for returns is the responsible thing to do. Messaging around “how a moment spent checking your size may help the planet” or “we are in this together” can go a long way to building a sense of empathy and trust.
Understanding the price elasticity of individual brands in a high inflation environment and how associated price messaging is executed, will determine whether brands are able to increase perceived empathy or whether they will erode brand trust and loyalty. Understanding how customers feel about saving the planet is critical in the way that retailers reminding them about behaving responsibly and whether their actions will be a boost or a barrier for sales.
About the author
Sam Sturgeon, PhD, is the Global Head of Marketing Sciences at Hall & Partners. He completed a dual-title PhD in Human Development and Demography and has over 15 years of experience as an applied statistician, demographic forecaster, and mixed-methods market researcher. He loves answering complex questions with innovative research methods and then bringing compelling stories to life through captivating data visualization. His work has been featured in Politico, the Wall Street Journal, USA Today, the Washington Post, and other publications.
Hall & Partners is a leader in the science of human decision-making and experts in modelling consumer choice and motivation, especially related to brands and pricing. We have helped major technology, food distribution retail/apparel, and financial services brands strategize on how to adjust their prices, and messages, in ways that help rather than hurt their brand.
For more information visit www.hallandpartners.com
