The Retailer Autumn Edition 2021

THE RE TA I L ER

2 8

OPEN BANKING PAYMENTS CAN TURN REFUNDS INTO REVENUE

William McMullan Director of E-commerce Trustly

M ANY UK RETAILERS OVERLOOK THE IMPORTANCE OF THE TIMELY PROCESSING OF REFUNDS. If we change our mind about a purchase, or if something is faulty, we simply need to return the product with our proof of purchase and the retailer will provide a replacement or refund. Offering generous returns policies of anywhere between 14 days and a whole year, as well as free return shipping for online sales, are just two of theways that UK retailers are using to differentiate themselves from the competition and attract and retain customers. This is great unless we pay by credit or debit card, which are the most common payment methods in the UK today. Refunds will go back onto the same card used to make the purchase so customers wait 3-5working days for the refund to show up in their account. One major UK retailer even warns its online shoppers of refunds taking up to a full month. In the past year alone, more than £3.5 billion of UK shoppers’ money has been held hostage in online refunds. The main sources of these refunds come from three major retail categories — clothes and accessories (50% of refund requests), technology (20%), and home and garden (19%).

At Trustly, we are digging deeper into this issue, because not only is this a lost revenue opportunity, as I will explain below, but it is costing retail - ers more to handle slower refunds. The process can involve collecting manual information and the long lead-time can cause many consumers to contact customer services to chase up their refund. Card payments are built on slow rails and often rely on slow processes and involve a chain of different players with different SLAs, who move the money between customers and retailers and back again in the event of a refund. A recent survey carried out on behalf of Trustly of over 10,000 consumers and 1,000 retailers from 10 major European markets reveals that the timely processing of refunds is a core factor affecting customer experience. The refund process influences how shoppers feel about a brand more than many retailers may realise. It affects not only their initial decision to shop with that brand but also long-term loyalty. The survey confirmed that when customers make a return, they want their money refunded faster. Shorter refund times have a direct impact on sales, since customers often wait until after they receive their refund to make a new purchase. This is especially important in the battle to win the loyalty of younger consumers. Those we surveyed were much more likely to hold off spending until a refund has cleared. This is possibly because they have less disposable income or purchasing power, so they need to wait for the money to be refunded.

£3.5 billion of UK shoppers’ money has been held hostage in online refunds, with four in 10 having to wait between three and five days for their money to be returned.

50% clothes and accessories

technology home and garden 20% 19%

The main sources of these refunds come from three major retail categories — clothes and accessories (50% of refund requests). technology (20%). and home and garden (19%)

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