Local Response | Creating Resilience
The end of free returns: Will consumers continue to spend online?
March 15, 2023 5 Minute Read
Online shopping surged during the pandemic, reaching a peak of 37.8% of all retail sales in the UK (as of January 2022). Despite latest figures from the Office for National Statistics showing that the proportion of retail sales made online has fallen and is now at 25.0% (as of January 2023), this is still significantly above pre-pandemic levels (compared to 19.8% in February 2020). And, in CBRE's Global Live-Work-Shop survey, 56% of UK consumers stated that they spend more online than they did before the pandemic and will continue to do so.
The growth in online returns has become a huge challenge for retailers as they navigate complex transport and logistics costs to keep up with the increased demand. One in three items bought online are returned, much higher than the 9% return rate for items purchased in-store. ‘Buy, try, return’ culture has also become a more frequent habit amongst online shoppers, with a rise in the number of orders placed with the intention of returning the entire order after trying on items for social media.
The average return per parcel costs a retailer £20 due to a range of shipping, warehousing and re-packaging costs, which accounts for around 10% of a retailer's supply-chain costs. The whole returns process is currently costing British retailers approximately £7 billion a year. Many retailers are looking at ways to reduce these costs by pushing consumers to collect online orders in-store, where 85% percent will also make an additional purchase. Several major UK retailers have therefore recently introduced online return fees, with many more likely to follow suit.
But will consumers still shop with retailers online if they do not offer free returns? Over half (57%) of UK consumers we surveyed stated that they would not continue to spend online if no free postal return was offered. Amongst ‘Online Enthusiasts’* this ratio was even higher, with 67% stating that they wouldn’t shop with a retailer if they didn’t offer free returns.
'I will not shop from an e-commerce retailer if there is no free return'
Source: Live-Work-Shop Survey
By age category, Millennials were most unlikely to shop with a retailer online if they didn’t offer a free return option (67%). While Gen Z and Baby Boomers were more willing to continue to shop online despite not getting free returns (50% and 52% respectively). Those in city centre locations were also the least likely of respondents to shop with a retailer online if no free return was offered (67%), likely due to their proximity to physical retail locations where they can complete the returns process.
This may provide some positive news for physical stores as more consumers choose to shop in-store rather than online to avoid these new returns costs. They are increasingly directed to make their returns in-store - 48% of respondents to our survey stated that they prefer to return in-store than by postal services. However, with a large share of consumers (43%) still willing to buy online despite having to pay for returns, we expect online-only retailers to continue to focus on free returns options or paid subscription delivery and returns services, to entice consumers. This will be increasingly important to these retailers, due to the pressures that rising inflation and the cost-of-living crisis are placing on consumers’ propensity to spend.
Read our Global Live-Work-Shop Report to find out more.