Can H&M Make Landlords Pay For Returns?


Returns are a huge problem in the fashion industry, in-store but even more so online where it is estimated that between 25-50% of purchases are now returned - therefore as online shopping continues to grow the question of how to cover the increasing cost of returns is a hot one.

Fashion giant H&M are currently embroiled in a fight with their landlords, here in the UK, as they are trying to pass them their returns costs demanding terms that mean the property owners would bear the cost of the increased number of returned clothes. 

The Swedish fashion retailer (with 304 out of their 4739 stores located in the UK) is according to a recent report in The Times newspaper, offering landlords “total occupational deals” where they pay a sum linked to the amount of sales the store makes leaving them to divide it between service charge, rent and business rates. But H&M is not only pushing for turnover-based rents it is also reportedly insisting that if any returns come into store, including online purchases, then they will be deducted from that shop’s revenues.

Whilst expecting landlords to cover the rising costs of returns is unlikely to be a widespread solution it certainly highlights the shift in power underway between UK landlords and retailers.

Another method of mitigating the growing cost of returns involves a tightening up on returns policies.

ASOS hit the headlines earlier this year when it updated its returns policy threatening to blacklist customers it suspects of consistently wearing and returning items. Serial returners are undoubtedly a costly thorn in retailers’ sides but most customers actually return products for entirely legitimate reasons; fit, not as they imagined, size, convenience of ordering more than one size/style knowing how easy it is to choose then return etc.

However whilst the obvious answer might be to make it harder for customers to return items a competitive, speedy returns process is a “central component” of the modern fashion retailer. 

Returns are an inherent part of the online model but there are things retailers can do to minimize the volume – such as analyzing data to proactively manage down returns rates, use clear photography and elaborate on product details and sizing details to help customers find products more likely to suit them. 

There will always be an element of items returned and the process needs to be quick and efficient allowing products to go back ‘on the racks’ quickly. 

Returns are definitely an important space for optimization particularly as the popularity of “buy now, pay later” services, such as Klarna and Afterpay, are driving even higher returns, as customers don’t even have to pay when they order.

Will H&M win it’s battle to take into account the returns a store receives in the rent they pay?

I am the CEO and founder of Mallzee Insights - the UK's most comprehensive retail insights business, using the largest dataset of customer product opinion to help improv...