How damaging are your fashion returns?

Last week, several media outlets picked up on reports that in 2021 in the USA; returned products bought by individual consumers amounted to 761 billion USD, an increase of 78% from 2020, with 16.6% of goods returned; 20% of online goods returned and 23 billion USD of online returns fraudulent (1).

Globally, “in 2020, a total of over 80 percent of consumers across the globe shopped online: reaching nearly 90 percent each, the leading regions that year were South America and Asia. North America had the lowest share with just over three in four consumers buying items on the internet.”(2) So take the above online statistics for the USA and increase them to fully reflect global returns. Eco-Age estimates that 30-40% of all clothes bought online are returned.

In Europe and the EU, 73% of EU+10 shop online, in Switzerland, up to 90% shop online. 63% of those purchases are in fashion/sports.(3) And the worst for returns? Switzerland, with 20% of 18-24 year olds returning goods bought online(4).

Another thing not covered by ANYONE is how damaging the #EU regulations* on « free for all #returns with no questions asked » are for small businesses (SMEs). This, despite internal industry complaints. One from Croatia for example:

“…the biggest challenge for (small and medium enterprises) SMEs
going online is regulation. We have some older e-commerce
laws, and it can be hard to follow the regulation without a
lawyer. Just last week the CEO of a marketplace complained
that they have issues with consumers returning goods that
are damaged; by EU law, online retailers cannot charge the
buyer for returns within 14 days, and our inspectors typically
rule in favor of buyers rather than retailers, even if the goods
are damaged. Therefore, one of the main challenges for SMEs
selling online is more laws protecting purchasers rather than
sellers
.”(5)

The regulation was a broad-sweeping design for seller-fraud, which takes no account of genuine SME retailers and CONSUMER fraud.

So why is this happening?

On one hand, the consuming public do not realise the #cost of a return.

Bank fees are not returned to the retailer and transport fees are TWICE the amount with a return… and paid for by the retailer. Large businesses simply column this as « breakage ». But for small businesses – of which many ethical fashion companies still are – these costs can be crippling.

Who benefits? Banks, transport companies and…. the consuming fraudster.

And on the other hand, consumers do not realise that they are committing a #crime, or they are actually criminals.

Heard of #wardrobing?(6) It is essentially online shop-lifting. Going beyond tucking in a security tag to wear an outfit for a photo-shoot or a night, a large swaft of #influencers #instagram ers and #tiktok ers,- particularly those that are hobbyists or after-work ones – love this EU regulation, as they can gleefully order online (note that I do not use « buy », because they have ZERO intent of buying), use the item for a reel or story and send it back with « no reason ». Again in the USA:

“37% of respondents admit to wardrobing apparel, shoes, and accessories. Worryingly, most respondents in the survey would not be considered likely perpetrators of return fraud; 63% are college graduates, 58% made over $50K / year, and 61% are qualified, technical, or managerial employees.” (6)

Heard of “bracketing”? This is ordering multiple sizes or colours of one item online to try at home then returning most, if not all.

Heard of contractual obligations? Sadly with the increase in e-commerce, many individuals tick the “I have read the terms and conditions” and don’t bother reading them. A Swiss online SME retailer (Switzerland is also subject to EU rules, when the customer is in the EU), has also experienced problematic returns, when customers agree to online terms and conditions, including costs of transport and customs, then ignore them with fraudulent returns. Problematically, even with retailer’s legal protection, banks will still rule in favour of customers for an automatic credit card reimbursement. Often now, as SME online businesses rely on third party payment providers (TPPs), they don’t even have a say in disputes when a fraudulent customer or criminal is involved, as financial providers don’t want to rock their profitable boats. The TPP unicorn Stripe for example, with a fraudulent or return transaction, charges an SME a fee both ways to gain and refund the transaction, then also can apply a fraud fee, with minimal ability for an SME to dispute this in a transparent manner. So essentially, banks, TPP and regulations are enabling fraud and #crime. More than 85% of Swiss e-commerce businesses surveyed have been victims of online customer fraud. (7)

What do returns cost? Forgetting about the cost to the environment (which this author thinks is over-commodified), simply the financial cost of a return can now be up to 66% of the selling price.(8) Back to the environment, estimating environmental costs of transport pollution? Can we really put a price on that? And on packaging? Very difficult to estimate. On returns being dumped? One group estimates that in 2020, 2.6 billion kg of returns went to landfill in the USA(8).

The solution?

Policy makers, legislators and regulation makers are ignoring the financial and environmental costs of returns and the increasing crime of fraudulent returns. They are also weak on vigorous dispute mechanisms for retailers and online businesses. Regulations need to be revised yearly to keep up with the speed of technology and online worlds, with new separate regulations for SMEs.

Welcome to the e-verse.

This short article is part of a longer study on e-commerce in fashion, coming in 2022.

*Summary of EU online return rules: https://europa.eu/youreurope/citizens/consumers/shopping/guarantees-returns/index_en.htm
https://op.europa.eu/webpub/grow/factsheets/shopping-online/en/
(1) Obey Manayiti and Andrew Edgecliffe-Johnson, “Goods returned by US consumers surged 78% in 2021” Financial Times https://www.ft.com/content/c926c427-83e2-4fa7-8165-8466b6b037a7, 25 January 2022.
(2) https://www.statista.com/statistics/1192578/worldwide-share-of-consumers-that-shop-online/
(3) 63% of those purchases are in fashion/sports over the last 3 months 2021 in EU-27. 2021 EUROPEAN E-COMMERCE REPORT https://ecommerce-europe.eu/wp-content/uploads/2021/09/2021-European-E-commerce-Report-LIGHT-VERSION.pdf

(4)Survey by Statista: Spain, France, Italy, Germany, UK and Switzerland. https://www.statista.com/statistics/1257082/average-return-rates-among-digital-shoppers-in-europe/
(5) Interview with Marcel Majsan, eCommerce Hrvatska, p82 in 2021 EUROPEAN E-COMMERCE REPORT, Ecommerce Europe https://ecommerce-europe.eu/wp-content/uploads/2021/09/2021-European-E-commerce-Report-LIGHT-VERSION.pdf
(6)
August 2020 E-Commerce Returns Survey https://www.360idtag.com/blogs/news/what-is-wardrobing-return-abuse
(7) “Plus de 85% de tous les commerçants interrogés déclarent avoir déjà été victimes de fraude.” By P.Kessler, Étude CRIF : fraude dans le commerce en ligne, 19 November 2021 https://handelsverband.swiss/fr/news/crif-etude-fraude-dans-le-commerce-en-ligne/
(8) Optoro, quoted in the Financial Times, by Obey Manayiti and Andrew Edgecliffe-Johnson, “Goods returned by US consumers surged 78% in 2021” https://www.ft.com/content/c926c427-83e2-4fa7-8165-8466b6b037a7, 25 January 2022.

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