UK retailers could be sleepwalking into a £34.1 billion hole in annual sales by tightening their returns policies, with new research suggesting that the very measures designed to protect margins may end up driving shoppers away.
The figure comes from Locus, the global logistics technology company, which has modelled the potential cost of the industry’s growing crackdown on returns. Against a backdrop of faltering consumer confidence, the warning lands at an awkward moment for a sector already wrestling with thin margins and cautious households.
Recent Office for National Statistics figures show that total UK retail spending on textiles, clothing and footwear reached roughly £57.8 billion over the past 12 months. Drawing on its own consumer sentiment data, Locus estimates that £34.1 billion of that spending, well over half, could be put at risk each year if shoppers cut back on purchases as returns policies become more restrictive.
A survey of 2,000 UK shoppers carried out for Locus paints a stark picture of how sensitive consumers have become to the friction of paying to send goods back.
Some 59 per cent said they would be less likely to make a purchase if a retailer introduced return fees or stricter returns policies, while 56 per cent said they would simply switch to a different retailer altogether. Crucially for any retailer hoping that tougher rules will nudge customers into keeping more of what they buy, only 38 per cent said they would hold on to items rather than return them in response to a fee. One in five shoppers, meanwhile, expect or plan to return goods from the majority of orders they place.
The findings cut against the grain of a strategy now spreading across the fashion sector, where rising returns costs have prompted a wave of return fees, shorter return windows and tighter eligibility rules. ASOS is the latest to draw criticism, with frequent returners facing new charges under a revised fair use policy. The Locus research suggests such moves may carry an unintended sting, denting both spending and loyalty at precisely the point where shoppers are most easily lost.
For Subhro Chakraborty, chief revenue officer at Locus, the data points to a balancing act that many retailers are getting wrong.
“Returns have become one of the most complex challenges facing retailers today,” he said. “While there is understandable pressure to reduce return-related costs, our research indicates that overly restrictive policies risk creating friction at a crucial point in the customer journey. Retailers need to balance operational efficiency with customer expectations, or they may inadvertently drive shoppers elsewhere.”
Chakraborty argued that consumers remain acutely sensitive to anything that increases the perceived risk of shopping online, particularly in fashion, where fit, size and product expectations can vary widely from one purchase to the next.
His prescription is to tackle returns at source rather than at the till. “Rather than relying solely on stricter returns policies, retailers may find greater success through investments in technologies and operational improvements that reduce unnecessary returns before they occur,” he said, pointing to better product information, enhanced sizing guidance, sharper inventory visibility and more efficient fulfilment.
“By improving operational efficiency across the supply chain, retailers can lower return-related costs while maintaining the flexible shopping experience consumers expect. The retailers that will succeed are those that leverage technology and customer insights to create a better post-purchase experience while simultaneously reducing avoidable returns. The goal should be to improve purchase confidence, not undermine it.”
It is a message that chimes with a broader shift in how the sector is thinking about profitability. Rather than reaching reflexively for discounts or penalties, a growing number of retailers are turning to technology to protect their margins, using data and automation to take cost out of operations without passing the pain on to the customer. As the digital transformation of UK retail accelerates, the question for boardrooms is whether the cheapest way to cut returns is to charge for them, or to design them out altogether.
For an industry counting every basket, £34.1 billion is a sobering reminder that the route to healthier returns may run through the warehouse and the product page, not the refund policy.