Are fault-free returns ruining small businesses?

A new report from ParcelHero suggests that many specialist e-commerce businesses are concerned that they will fold by the end of this year, due to the growth of a no-fault returns culture.

The expectation that consumers should be able to return any item, for any reason – for free – is heavily impacting small online shops specialising in themes such as vintage clothing, rare comics and sci-fi memorabilia, classic car parts, and music.

David Jinks MILT, ParcelHero’s head of consumer research, said: “In recent years we’ve been living in something of a Golden Age for niche fashion and cult collectables stores, thanks to the amazing variety of online businesses covering all our interests and hobbies. Now, because of the Consumer Contracts Regulation’s 14-day ‘cooling off period’ – which came into law in 2014 – customers increasingly expect they can return an item on a whim, without even paying postage.

ParcelHero interviewed the owners of sites selling everything from 1980s fashion to Fender guitars and exotic animals. They have all been left reeling as our report reveals 8% of shoppers return several items a month.

Our new report, Retailers Reach the Point of No Returns, found a huge gulf between the expectations of shoppers and the reality for niche retailers. It’s perhaps time customers heard about the very real problem of return costs from the owners of their favourite online stores. It may make them rethink their expectations.”

Among the retailers featured in the report is Imogen Shurey, founder of the online vintage clothing and handmade store, Velvet Cave. Shurey says: “As a small business it can be quite frustrating having to accept returns as the money may already be spent. People are so used to being able to return things to big stores easily and often free of charge so it’s difficult to compete.

For a company with a huge turnover the money lost doesn’t make an impact but too many returns could spell the end for a small business.”

Adam Brewer, founder of the online video game memorabilia site Gamerbilia.co.uk, agreed that returns have the potential to be financially damaging because in some cases you can lose all your net profit on an order if the customer returns it.”

Jinks concluded: “Our fascinating interviews with specialist retailers of all sizes reveal the huge problem of customers increasingly exploiting to the hilt their rights under 2014’s Consumer Contract Regulations. For example, 10.4% of customers admit to buying clothes in various sizes and simply returning the ones that didn’t fit, while traders say that are frequently pressured into paying the cost of returns for unwanted items – or risk losing their all-important 5-star ratings.”