H&M could start charging customers for making online returns.
During its latest earnings call with analysts on Thursday, the Swedish clothing company revealed that it is preparing to test return fees on merchandise in select markets.
“It all depends on how it’s received by the customer. So that’s why we do a test to see if that is something to fast track,” said H&M CEO Helena Helmersson at the event. “If we’re about to roll it out, it will take some time. We don’t have an exact time limit on it. But again, let’s see when we see the evaluation of the tests, whether this is the most impactful thing to do or not.”
H&M allows two types of returns: in-store and online. The fast-fashion seller clarified in an email to CNN Business that the fee that will be tested in some of its markets only applies to online returns, noting that “If a customer returns a product that was bought online in-store, there is no fee.”
Why is H&M testing return fees on merchandise?
Charging customers for making online returns will help H&M cut operating costs and expenses, especially now that higher raw material and energy costs, a stronger dollar, a pullback in consumer spending, and even the Russian invasion of Ukraine are weighing on its business.
Aside from being a potential cost-saving move, setting return fees will also help in preventing H&M’s inventory from further piling up. Due to households tightening up their discretionary budgets, CNN Business reported that sellers like H&M are desperate to get rid of clothes, shoes and other fashion items because they are losing lots of money on unsold products. Apparently, return items only make inventory levels worse.
“Retailers are stuck with excess inventory of unprecedented levels. They can’t afford to take back even more of it,” Burt Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group, told CNN Business. Flickinger said that setting return fees is a smart and strategic tactic to dissuade customers from making returns.
Zara did it first
H&M’s plans to test return fees in select markets come after Zara in the United Kingdom started charging a fee of £1.95 ($2.39) to return merchandise bought online. But unlike H&M which is looking to trim costs and expenses, Zara reportedly instituted the charge for environmental reasons.
Zara UK deducts the fee for online returns from the refund that customers will receive. Meanwhile, customers who purchased items online can still return them in-store for free. In the United States, mailed returns to Zara are still free for 30-days post-purchase.