One Retail Giant Will Soon Charge Customers To Make Returns?
H&M is piloting a new returns policy that will charge customers a fee for returning merchandise purchased online to a physical store, the move is part of its strategy to deal with supply challenges and overstock.
Popular fashion retailer H&M is preparing to test a new returns policy in some markets. The Swedish company plans to charge customers a fee for bringing back merchandise that was purchased from the outlet’s online store. The move forms part of a series of efficiency measures to reduce surging costs and will be introduced in Norway and the United Kingdom in the coming days.
The announcement was made during the fast fashion retailer’s third quarter three earnings. H&M CEO Helena Helmersson told analysts the company will soon test run return fees to see the response from shoppers. “We are testing it as a possible measure we could take, all depending on how the customers react,” she said in a statement to CNN Business. She also explained that rolling out the trial will take a while. So the company doesn’t have an exact time frame.
H&M is one of the biggest sellers of affordable fashion. But the retailer has been facing several challenges, including higher raw material prices and soaring energy costs.
The stronger dollar, exiting the Russian market due to the country’s conflict with Ukraine, and a pullback in consumer spending have also weighed on its business. As a result, the company is doing everything it can to save on costs. This now includes setting return fees.
Another way the retailer is trimming costs is by evaluating how it purchases services. Company bosses will also be examining how the business manages office and travel expenses. “Prices have also gone up. But not enough to fully compensate for the severe headwinds in sourcing,” Head of H&M investor relations Nils Vinge said during the earnings call.
However, there could also be another reason for H&M hitting customers with return fees. Several retailers have recently found themselves stuck with too much inventory ever since consumers started tightening up their discretionary budgets. Now, they’re desperate to get rid of things like clothes, shoes, toys, gadgets, and furniture, because they are losing money on unsold products. Product returns only add to the never-ending losses.
Following H&M’s announcement, industry experts say retailers are considering two options to address returns. They can either dissuade customers from bringing things back with return fees or just let them keep the items.
“These tactics are smart and strategic,” retail expert and Managing Director of retail consultancy Strategic Resource Group, Burt Flickinger said. “Retailers are stuck with excess inventory of unprecedented levels. They can’t afford to take back more of it.”
Interestingly, H&M isn’t the only retailer to charge customers for making returns. Abercrombie & Fitch has a $7 fee for online returns sent by mail. But customers can return unwanted items they ordered online for free when they go to the store. American Eagle Outfitters charges a $5 shipping fee for refunds, and Pacsun deducts a $7 shipping fee from a customer’s refund, according to Yahoo! News.
But it’s not all bad news for H&M. The company said inflation on some raw materials like cotton may have reached a peak, even though currency effects could keep prices rising next quarter. Transport costs have also decreased in recent months. Meanwhile, the retailer’s return fee won’t apply if a customer goes to a store to give back their online purchase.
