Zara may be in the midst of changing the parameters of e-commerce returns for apparel retailers.  

The company announced in May that U.K. customers will now be charged 1.95 pounds, or about $2.45, for customers to return online purchases to third-party drop-off points. Customers are still able to return online purchases at any Zara store in the U.K. free of charge. 

The returns system is already in place for Zara in other European markets, including Belgium and the Netherlands, but most e-commerce shoppers opt to complete their returns in stores. It’s unclear if the charge is going to come to the U.S., as the decision is made on a market-by-market basis.

Charging a fee for returns is not new and is seen sometimes with products like electronics, according to Mehmet Altug, associate professor of operations management at the School of Business at George Mason University. “From a return volume perspective it’s a good thing. But, on the other hand, from a profitability perspective, it has implications. One has to be careful with the price, the demand competition … From a profitability perspective if you’re the only retailer doing that in your sector, in your industry, then you might start to face some demand issues. Customers may start to go to another retailer.” 

As retailers navigate high return rates and thinner margins due to supply chain pressures, will it become the norm to charge for returns? 

The state of returns

E-commerce in the U.S. grew 30% in 2020, which is the fastest growth rate since 2002, according to Forrester. During that time, clothing, accessories and footwear as a group accounted for 19% of all U.S. e-commerce sales growth. Forrester projects that digital sales in the clothing category will reach 47.5% by 2024. 

However, retailers have a problem when it comes to e-commerce, specifically when it comes to apparel and footwear, and that is returns. Last year, shoppers were expected to return over $761 billion in merchandise, with about $218 billion coming from online purchases, according to the National Retail Federation. The category with one of the highest return rates? Clothing.

And while retail’s response to returns historically has been to make it as easy as possible for shoppers, that may be changing. Especially as companies are currently taking a hit on margins due to increased fuel, materials and other supply chain costs. 

Over the years, an increase in speedy e-commerce paired with generous return policies and inconsistency in apparel sizing has all led customers to bracket their orders. Bracketing involves customers buying multiple sizes, colors or styles of an item, knowing they will return some of what was purchased. Many people do it to navigate complicated or erratic sizing issues with clothing. However, shoppers also use it as a way to simply try on clothing. 

“I applaud them. Somebody had to do this.”

Tony Sciarrotta

Executive Director, The Reverse Logistics Association

“The bedroom is now our dressing room, or the living room is now our dressing room for products we buy, clothing especially,” Tony Sciarrotta, executive director of The Reverse Logistics Association, said in an interview. “Zara recognizes that the costs have gotten enormous. If you’re shipping three garments for a person, and they’re only expecting to buy one, that’s a 66% return rate. So that’s the nightmare of the apparel industry. And I applaud them. Somebody had to do this.” 

Zara taking on the issue of returns may be an important test case for retail, simply due to its scale. Zara and Zara Home combined have nearly 2,500 stores and brought in nearly $21 billion in net sales in 2021, according to the company’s latest annual report. The retailer recognizes itself as one of the biggest international fashion companies, with parent company Inditex acting as one of the world’s largest distribution groups. 

But, just like Best Buy put limits on returns many years ago, Sciarrotta said that Zara may become stronger because it has put policies in place regarding returns. “It’s a goal to be a leader. It’s a goal to be growing your business. But, you can’t be growing your business as most e-commerce companies did without looking at the end-to-end cost of your business,” he said. 

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