Zara’s Return Policy and the Future of Retail

With inflation and supply chain issues crippling retail, the announcement that Zara has started charging customers £1.95 for returning items online has sent shockwaves throughout the industry. Al Gerrie, CEO at ZigZag Global explores the matter…

Increased labour shortages and fuel surcharges have put retailers in the mud, and this news is evidently a way for many brands to recoup lost costs. Considering the behavioural change brought about by covid-19, returns was an obvious starting point for retailers to make up lost ground. 

Online returns have significantly increased and are costing retailers significantly. Zara is setting a precedent through this brave and timely announcement. The question is, will other retailers join them?

No such thing as ‘free returns’

Since the onset of the pandemic, the frequency of returns has increased significantly with shoppers unable to try items on in some stores due to covid policies. This means online baskets are often filled with the same items in different colours and sizes. This reigns especially true amongst the younger generations which has seen an increase from 33 to 41% since the pandemic.

The cost to restock, repack, post and sanitise returned items is a heavy burden for most retailers, a problem only exacerbated by the misguidance of retailer’s sizing guidelines and online instructions. These hidden costs are not only wiping out retailer’s profit margins but are also environmentally unsustainable. 

There is no such thing as a ‘free’ return and, quite frankly, consumers have been spoiled with free returns for a number of years. When it comes to returning merchandise online, it is important that retailers and customers alike recognise their behaviour to make returning items efficient and environmentally friendly for the future of retail. 

A fine line to tread 

There is a general wish amongst customers for online returns to become sustainable. For this to become a reality, it is the retailer’s responsibility to educate consumers through targeted information and pop-up messages on their website at the time of purchase. 

Retailers are walking a tightrope. Whilst they should provide education to customers of the brand to be environmentally aware, retailers need to be wary not to impede the purchasing process. A good returns policy is thus critical for conversion, and over 70% of consumers now check the returns policy before making a purchase. 

Returning to charged returns

Other retailers will follow in Zara’s footsteps, particularly those that want to re-construct their returns policy to include free and paid returns. It is certainly a bold move by Zara as it is hard for retailers to become a trendsetter in what could be seen as impacting negatively on customers. Nobody wants to be the first that jumps, but this move is one that I respect and support. 

I expect retailers to start giving consumers greater choice, and that will likely be a combination of free and paid returns such as refund as a gift card, free exchanges or paid refunds. This combination should be a cornerstone of returns policies in the coming years. 

It is of paramount importance to note that not everyone expects free returns. This was a trend set by the US, UK and Germany, three countries that predominantly provide free returns for customers, a charge backed up by retail giants like Amazon and Zalando. If retailers and customers can adopt multifaceted policies in other countries, I see no reason as to why the UK cannot follow suit. 

Implications for the high street 

Zara’s returns policy is obviously a push to get customers back into high street stores, and it will inevitably work for some. However, for the subset of those who cannot drive or access stores close to home, home collection for returns and home delivery remains the easiest options. These are the customers that may think twice from purchasing from a retailer that does not offer free returns. Younger shoppers who cannot drive for instance, rely on home delivery.

Pure play online retailers, like ASOS, will find it difficult to adopt this stance without the benefits of an in store network. For example, Next charges its customers for returns through Collect Plus but is not charging for a store refund. Zara, in this sense, is following suit. 

This disparity between pure play online retailers and in store brands reveals the difficulties in implementing consistent policies. 

The future of returns

There is a place for free returns in certain circumstances going forward, be that subscription-based or promotional opportunities. But the tide on returns policies is beginning to turn. Brexit has taught us that we are in for a long haul regarding increasing costs, labour shortages and mounting inflation that doesn’t look like changing. 

The challenge for retailers is to manage those issues carefully. If retailers start charging for returns, the process for customers has to be a seamless returns experience through choice of a number of different home collection or drop-off solutions. Extra tools around paperless returns, exchanges and refund to gift card options should be implemented to provide value for money to loyal customers.