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Fashion’s returns problem: A tangled knot for the apparel industry

  • Article
  • Overconsumption and fast fashion trends have brought the financial and environmental impacts of returns into focus
  • We explore why so many consumers return clothes after purchasing them…
  • …and what retailers are doing to avoid returns, and handle them more efficiently

Hidden costs for the industry

Return to sender? The phenomenon of returns – consumers sending back products after they have bought them – is a major headache for clothing retailers. In the UK alone, apparel returns cost the fashion industry GBP7bn in 2022, according to the British Fashion Council (BFC).

It’s a problem on the rise. The acceleration of online shopping, developments in payment methods, and the trend of fast fashion have brought the returns problem into focus. Some online platforms see as much as 50% of products sent back by consumers, compared with an average 10% for purchases made in brick-and-mortar shops. As more retailers move online and overconsumption continues, return rates risk growing.

Return impose a burden on retailers. They are a logistical headache and encompass various financial costs from handling to discounting returned items. When retailers are able to resell returned items, the price reduction is often significant – with around half of resold items fetching 40% less than their original price.

23 million
Garments sent to landfill or incinerated in the UK in 2022 (Source: BFC)
Up to 50%
Rate of returns reported by some online platforms (Source: Company data)

The costs are environmental, as well as financial. Returns are a key driver of apparel waste. In 2022, they contributed an estimated 750,000 tonnes of CO2 in the UK alone. Items that cannot be resold or recycled are often incinerated or sent to landfills, with 23 million garments sent in the UK last year. Addressing the returns problem is not just of financial importance for retailers but a key ESG one too.

What’s driving the trend? We identify several factors behind the rise in returns:

  • ‘Bracketing’ is the action of purchasing the same garment or item in multiple sizes or colours, then returning the items that don’t suit
  • Free returns make it easier for consumers to pursuing bracketing
  • ‘Wardrobing’ involves buying items to wear once (sometimes for use in social media pictures), and then returning them

But retailers can take action to reduce the problem. We identify three focus areas we believe are important to improve sustainability – product representation, technology, and consumer education.

Product representation: Improvements in product descriptions, size calculators, 360-degree views, and model diversity all have the potential to reduce returns by helping consumers buy the right product first time.

Technology: Innovations such as virtual reality dressing rooms could also help consumers shop with greater confidence. What’s more automation, digitalisation, and the appliance of artificial intelligence could help make the returns process – from logistics to reselling – more efficient.

Consumer education: Bringing attention to the impact returns have both environmentally and financially can encourage consumers to make more conscious decisions. Ultimately, addressing overconsumption appears key to untangling this knotty problem.

Would you like to find out more? Click here* to read the report, which includes more detailed discussion of the returns strategy of various clothing retailers under our coverage. Please note, you must be a subscriber to HSBC Global Research to access this link.

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