This article is provided by BRC Associate Member, Signifyd.

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Signifyd data shows growth in returns across UK: how retailers can meet changing demands

The cost-of-living crisis is far from over as UK consumer confidence falls amid conflicting opinions around inflation. The Food Foundation reported last month that across the UK, 15% of homes were unable to afford basic groceries. In retail, the effect of stretched budgets is playing out more intensely in-store and online as buyers are returning purchases to tighten their belts. Returns cost the retail sector $761 billion of lost revenue in 2021 compared to $816 billion in 2022. Ecommerce returns alone have increased 16% in the last year to $248 billion globally. 

Amid new trends in return behaviours, Signifyd conducted a survey in tandem with OnePoll of 8,000 European (2,000 surveyed in UK, Italy, Spain, France) consumers to better unpack the motivations driving consumer behaviour, and potential solutions for retailers facing new challenges. Overall findings pointed to higher rates of ecommerce returns in urban centres, at odds with speculation around easing inflation. 

As consumers grapple with inflation, they’re naturally becoming more selective about the goods they keep from online orders. Coupled with the rise of return fraud, retailers must optimise to survive. From payments to returns, the continued cost-of-living crisis isn’t just impacting consumers – it’s a real threat to merchants, too.
 

Unpicking inflation tension

Despite government assurances that inflation is easing, consumers saw an increase between January and February from 3.1% to 3.2%. While this remains low compared to the double-figure rates seen between 2020 to 2023, persistent strain on consumer wallets (and decision-making) are finally biting. 

Interestingly, these findings are juxtaposed by the BRC-Nielsen Shop Price Index, which showed that the pace of price increases slowed to 2.5% over the 12 months to February from 2.9% the previous month, the lowest since March 2022. Despite this, non-food goods (fashion, electronics, etc) are at higher risk for cost fluctuation due to things like shipping costs, geopolitical tension, and demand. These are also the items more likely to be returned to a retailer for various reasons. 

So it’s no wonder then that people are being more stringent with their spending. But interestingly, alongside inflation, we’ve seen a spike in chargeback fraud within the UK over the past few years. According to the Barclays Consumer Spend Index, many shoppers are ‘serial offenders’, returning up to £7 billion each year! Furthermore, we polled retail professionals at MPE 2024 as to their biggest challenges in 2023 and an overwhelming number (41%) said that the biggest challenge was lost revenue due to customer abuse. 

This presents a key tension facing retailers in a difficult economy:

Regional responses to returns

Our data found that across the country, rates of ecommerce returns are higher in urban centres. Londoners and those in Northern Ireland are feeling the financial squeeze particularly intensely, as they’re the most likely to return products bought online. Compared to the national average (29%), Londoners were particularly selective about what Christmas gifts they kept; nearly half (47%) returned or plan to return gifts from loved ones during last year’s festive season. 

The country is also being more stringent with the importance of good returns policies when buying an expensive gift. 73% of all Britons said it was a ‘fairly’ or ‘very’ important factor in deciding to buy; those in the North West (80%), North East (82%), and Scotland (77%) were most concerned. 

Interestingly, despite efforts to save for many, the vast majority of consumers across the UK remain loyal to credit and debit card options (52% and 54% respectively) versus other forms of payment like buy now pay later (BNPL) or Paypal. Even where alternative methods are more often used – like in the North East of England - Klarna (13%) and other BNPL (9%) options remain a relatively unpopular option. 

The Signifyd / OnePoll survey found BNPL use flagging across all demographics, including among younger consumers who have been the most enthusiastic users of the modern layaway model. Time will tell whether the shift is an anomaly — driven by consumers’ hesitance to be locked into the inflexible, recurring payments associated with BNPL.
 

Recommendations for retailers

With the rise in ecommerce returns, many merchants are focusing efforts entirely on the prevention of returned orders. But I would argue that they should instead focus on the full buying lifecycle. That includes providing a smooth returns policy. 

Signifyd’s State of Commerce report revealed that 37% of UK consumers said two or fewer bad online experiences would cost a merchant their business for good. While merchants are focused on the checkout process, our most recent data shows that barriers to returns are just as damaging.

While consumers continue to feel the pinch, it’s never been a more critical time for retailers to implement more than just a technological facelift. Instead, they need a profound shift in how they respond to consumer demands. 

Our data was clear that current returns policies that put customers first win; merchants must meet customers here and be savvy about managing customer experience with fraud management. A holistic, tailored strategy is crucial, particularly with chargeback fraud currently plaguing the UK and returns making it difficult for retailers to prevent the crime before it happens.