Danger, politicians at work

Unless our industry raises serious and loud objections, it could soon be mandatory to refund returns postage costs on any order over €40 from any EU country. Some of our members already offer free returns on all orders, but I know many of us only do this on selected products, or as a promotional offer, and certainly not to customers ordering from countries where we lack the scale or logistics for a low-cost returns service.

You may think I’m scaremongering, but this is the possible impact of amendments to the Consumer Rights Directive which were proposed at the end of March by the European Parliament and are now being discussed between the Parliament, the Council and the Commission. If these three bodies reach agreement, the Directive could be enacted without further review as early as this month. It may then take a couple of years to be implemented, but it will happen.

The CatEx advisory board is working in partnership with the British Retail Consortium to lobby against the amendments and we think it’s time to enlist the help of our members. We’d like you to email your MEP and ensure he or she is more aware of the wider impact of this legislation. Many MEPs are supporting the amendment, as it has been presented to them as enhancing the rights of consumers, yet we believe it could well reduce consumer choice and lead to consumer confusion and frustration.

To help you, I’ve summarised our arguments below. Please feel free to use all or some of these arguments in your communications, depending on how relevant they are to you. For further information and the very latest news on CatEx’s campaign on this issue, you can also visit our website, 
www.catalogueexchange.co.uk.

1. There will be a negative impact on cross-border trade.
Lacking the volume and dedicated logistics arrangements of larger businesses, the per order cost of returns postage from outside the UK is significant. To be obliged to refund this to customers anywhere in the EU would deter us from trading cross-border, to the detriment of UK business and EU customers.

2. There will be a negative impact on the profitability and viability of smaller businesses in the UK market.
Even within the UK, the per order cost of collection or refunding consumers the cost of their returns postage is much higher than for larger businesses. If the legislation is passed, it could dramatically affect the profitability of smaller businesses to the detriment of growth and employment. Moreover, to compensate for this additional burden at what is already a challenging time for UK businesses, it may be necessary to raise the price of the actual goods, or not accept orders from customers anticipated to be high returners. Neither of which is a good result for consumers, who are supposed to be the beneficiaries of the change.

3. There are practical challenges around implementation.
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Would we have any power to determine how the goods must be returned? For example, it might be most convenient for the customer yet could be most expensive for us if the customer takes the parcel to the local post office and then expects the returns postage cost to be refunded in full.

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This cost is even higher if the customer opts for a tracked service. Yet without parcel tracking, who would be accountable for lost-in-transit returns? We envisage many more customer contacts, whether by phone or email, again to the detriment of profitability and customer satisfaction.

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Assuming the customer pays the cost of returns postage and then expects a refund, he or she will need to provide receipts. Again, this could generate many more customer contacts, especially for cross-border transactions.

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Customers will be incentivised to place orders higher than the €40 threshold in order to secure free returns. Perversely, this could lead to overordering and more goods being returned, which generates waste and unnecessary carbon emissions.
 
The industry will need to develop the equivalent of a credit rating system in order to identify customers with a high propensity to return and be able to decline their orders.

Overall, we would suggest that the power is already in the hands of the consumer and market forces are the best mechanism to manage the challenge of distance selling. If consumers want free returns, they can shop with the businesses that offer free returns. This is a more powerful tool than regulation and we urge you to intervene to support us.

Finally, we have started up a dialogue in the Forum area of the website and we would appreciate questions and responses being channelled through this so that we can share our concerns and our ideas across as many members as possible. Please visit www.catalogueexchange.co.uk for more details.

Tim Curtis is managing director, Northern Europe, at Lands’ End. He is also deputy chairman at CatEx, the trade body representing the interests of the direct commerce sector.