Customer refunds cost small UK fashion businesses 48 million pounds

The rate of returns has increased exponentially since online shopping became the norm.

New data from Paymentsense’s annual Serial Refunder Report shows UK fashion businesses have lost an estimated 48 million pounds in revenue in customer refunds.

Apparel and clothing businesses ranked 7th in the top 10 for the highest value of refunds made per industry. According to the report, which estimates that each clothing and apparel business in the UK lost 2,220 pounds a year due to customer refunds.

This annual figure was calculated based on the amount refunded per location per month (185 pounds) from Paymentsense’s data. Refunds have seen a small decline of 3 percent compared to 2021, which Paymentsense states is likely to be in response of less disposable income during the cost of living crisis.

In order to collect the data Paymentsense analysed (anonymised) transactions from over 54,000 card machines across the UK and combined it with data from the Local Data Company. The unique data reveals the regions, industries, and months with the highest value of returned items from October 2021 to September 2022, and how much industries, unfortunately, lost as a result.

Commenting on the predictions for the rest of the year for small apparel and clothing businesses, Paymentsense said: “It’s unsurprising that online clothing sales rose by 2 percent in January 2023 compared to the figures from December 2022 due to the January sales often being popular following the Christmas period.”

“However, the ONS data also found that online clothing sales increased by 3.1 percent YoY, comparing January 2023 and 2022 data. Even with the costs for food and energy still rising, consumers are prioritising spending on clothing, despite overall online spending reducing by 2.1. percent in January 2023.”

“As the economical state of the UK remains unsteady, this number is likely to fluctuate but seeing YoY growth is hopeful for clothing and apparel retailers.”

US sees highest rate of returns

While not every clothing item that is returned is refunded, consumers in the US are expected to return more than 816 billion dollars worth of retail merchandise purchased in 2022, according to data from the National Retail Federation (NRF) and Appriss Retail. For every 1 billion dollars in sales, the average retailer incurs 165 million dollars in merchandise returns.

The cost of refunding

Apparel returns can have a negative impact on refunds because they represent a cost to the retailer in terms of processing the return, restocking the item, and potentially offering a discount to sell the returned item as open box or used.