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Boohoo: Why charging for returns could lead to tears


Boohoo
Boohoo has introduced a £1.99 charge for returns

Boohoo has followed Zara’s lead and quietly introduced a charge for customer returns.

It emerged last week that the online fashion giant now charges customers £1.99 for each parcel sent back.

The reasoning behind Boohoo’s move is obvious. The retailer has been hammered of late because of soaring returns.

Pre-tax profit plunged 94%, from £124.7m to just £7.8m in its full year to 28 February, and Boohoo said that a “significantly increased” returns rate, which was ahead against both expectations and pre-pandemic levels, was partly to blame.

At the same time shipping costs have also increased, which makes those increased returns more costly for Boohoo and its bottom line.

Although it may make sense from a P&L perspective, it’s a very risky move for Boohoo.

Returns are a reality in fashion. One in three items of clothing bought online are sent back, according to specialist ReBound.

Although for environmental reasons it would be great to reduce this, the truth is that many of these items are returned for good reason.

Fit can differ wildly from brand to brand in fashion. Although whizzy technology is helping customers to find the right size for them, there is no silver bullet.

In the world of online, our own bedrooms are the changing room where we find out what really fits us.

Of course, it’s not just about fit. People return clothing for a multitude of factors, including the quality of goods not meeting expectations.

With Boohoo’s keen price points, I imagine quality is an often cited reason for return. It is likely to smart with the customer that feels let down by the quality of a garment to be forced to pay £1.99 to return it.

Boohoo vs Zara

There’s a big difference between Zara introducing a returns charge and Boohoo. While Zara shoppers have the option of travelling to their nearest store to try-on the dress they have their eye on, Boohoo shoppers have no choice but to buy – and potentially incur the returns fee – in order to try.

Zara shoppers can also still return goods for free by taking them back to store, unlike Boohoo shoppers.

The biggest problem for Boohoo is that the returns charge makes it less competitive in the fierce young fashion sector where pretty much all major players offer free returns.

If shoppers are uneasy about paying for returns at Boohoo, they can check out similar outfits at retailers that do offer free returns such as Asos, H&M, New Look, Shein and even Boohoo’s stablemates Pretty Little Thing, Oasis, Warehouse or Misspap.

It may well have been wiser for Boohoo to test the waters by bringing in the returns charge at one of these smaller brands first to gauge the impact on demand rather than watch the impact on the biggest business in its portfolio.

I fear that demand will be hit. £1.99 is enough to make Boohoo shoppers think twice.

It may seem a nominal fee but at a shop where you can pick up a dress for less than a fiver, it could be a sizeable part of its customer’s increasingly squeezed budget.

The charge that is being introduced to protect Boohoo’s bottom line, may well end up having a much bigger impact on its top line.

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