ASOS risks alienating customers after introducing returns charge to select few

ASOS, which is taking steps to stop widening losses, has angered its shoppers after announcing it will be introducing a £3.95 returns fee from 8 October.

ASOS customers have reacted with anger after receiving an email over the weekend saying they had been identified as having a "frequently high return rate" and that they will now have £3.95 deducted from their refund if they send back less than £40 worth of items. Customers signed up to Asos Premier will get free returns if they keep at least £15 of their orders.

The retailer did not say what constitutes a high return rate but claimed nothing has changed for the majority of its customers.

"We’re making this change so that we can continue offering free returns to all our customers.

"For a small group of UK customers with a frequently high return rate whose shopping habits make offering them unconditional free returns unsustainable, they can still get free returns when they keep £40 or more of their order", ASOS told the BBC.

A customer named Charlotte wrote on X: "The problem for large returns is the fact half of your stock is ill-fitting and poor quality... I’ll take my custom somewhere else."

ASOS has introduced this returns fee as it battles to curb widening losses and tackle rising return rates, but it's not the only online fashion brand to feel the pinch. Earlier this year, PrettyLittleThing deactivated customers' accounts because of their high number of returns. It came shortly after PLT introduced a £1.99 fee for returns in June. Last year, H&M introduced a similar policy, however, the retailer quickly backtracked after facing similar criticism.

The changes, and subsequent reactions, to ASOS's returns policy showcase a sore spot in e-tail. Retailers need to manage returns effectively without alienating loyal customers.

Amal Ahmed, Director of Financial Services and EMEA Marketing at Signifyd, commented: "This situation highlights that returns are not 'one size fits all.' Penalising customers for high return rates can harm brand reputation and customer loyalty. Instead, retailers need a more nuanced, data-driven approach. Machine learning and AI can help differentiate between genuine returns and fraudulent activity, ensuring that good customers are not unfairly targeted.

"The update of the returns policy serves as a reminder of the potential reputational costs of inadequate return management. Retailers must balance operational efficiency with customer satisfaction to maintain trust and long-term growth. Embracing advanced technology to handle returns can help navigate these complexities effectively."

This follows last week's news that ASOS sold a 75% stake in the Topshop and Topman brands for £135 million in a new joint venture deal with Heartland A/S, an investment and holding company representing the interests of Bestseller owner and ASOS shareholder Anders Holch Povlsen.

For FY24, ASOS expects adjusted EBITDA at the top end of consensus estimates, sales slightly below guidance, with all other guidance as set at FY23 year-end remaining unchanged, subject to the impact of this latest transaction. A full update on its strategy and financial guidance will be given at its full-year results announcement in the coming months.