ASOS Considers Changes to Premier Delivery as Part of Strategic Shift, Raises Speculation on Future Return Policy Adjustments

ASOS, the leading UK fast-fashion ecommerce retailer, has announced plans to modify the terms of its Premier next-day delivery subscription. The company intends to increase the minimum spend required for eligibility from £10 to £15. While Premier subscribers will still receive free standard delivery regardless of basket size, an additional charge of £5.95 will be imposed for next-day delivery on orders under £15.

Industry analysts see this adjustment to the Premier delivery offering as indicative of a broader strategic shift within ASOS. It aligns with predictions that the company will move away from its previous “free for everyone” returns policy and begin charging for at least some returns. As such, logistics providers and carriers should anticipate ASOS and other merchants seeking sophisticated solutions to address the challenges associated with returns.

Returns have remained a significant issue for online retailers due to shipping costs, reprocessing expenses, and the devaluation of returned items in the fast-moving fashion industry. While retailers previously accepted the cost of returns as part of the online model during the period of online growth, recent trends have seen prominent brands such as Boohoo and Zara introduce charges for returns within the past year.

Another factor to consider is that in cost-conscious environments, returns rates tend to increase. ASOS acknowledged that return rates have risen close to pre-pandemic levels since May 2022 in its annual report of October 2022. Despite this, ASOS has maintained its commitment to free returns for all customers. However, the adjustment made to Premier delivery, including the minimum order value requirement, suggests that ASOS may be open to adapting its returns policy to address specific cases that impact profitability.

ASOS’s latest results presentation revealed that a small segment of its customer base, accounting for 6% of active shoppers, has a significant negative impact on profits. These customers, characterized by high activity, reliance on discounted products, and a high return rate, cost ASOS over £100 million in the first half of the year. Although the presentation discussed new goals such as reducing split deliveries and optimizing logistics costs, there was no explicit mention of addressing the returns issue in the same manner as the delivery side.

To tackle this issue, ASOS can leverage data from its returns portal to identify the most frequent and costly return behaviors and analyze the profile of customers associated with such returns. By targeting these specific shoppers with returns fees or limiting return eligibility for discounted products, ASOS could eliminate or recoup some of the costs associated with the least profitable returns, similar to how it eliminated free next-day delivery for low-value baskets. This targeted approach would still allow most consumers to benefit from ASOS’s free returns proposition while reducing the impact on profitability.

If ASOS changes its returns policy from “free for everyone, every time” to “free, except for…”, it could influence other retailers to implement similar restrictions on their returns policies. However, creating returns rules and implementing charges may not be as straightforward for retailers without the same resources or access to returns data. Many merchants still lack basic digital returns portals and the ability to collect comprehensive returns data at scale. To implement intelligent returns rules and charges, retailers require fully integrated solutions that incorporate order information to track returns and make informed decisions based on customer behavior.

Carriers have a significant opportunity to assist small and mid-sized retailers in becoming smarter about returns and increasing profitability. Doddle research from 2022 indicated that 74% of retailers without a returns solution would consider using one if it were offered by their parcel carrier. By providing a digital returns offering, carriers can enhance their overall value proposition and establish stronger partnerships with retail customers. Additionally, carriers stand to capture a larger share of returns volumes from small and mid-sized ecommerce merchants, potentially resulting in increased parcel revenue.

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