Returns set to cost retailers up to £400m this Black Friday

Data from global financial technology provider FIS has found that Black Friday sales in the UK are set to grow again this year – but shows that retail returns following the big day could cost unprepared retailers millions.

Analysis of Worldpay from FIS data shows that Black Friday transactions online and in-store in the UK were up 5% and 12% respectively year on year – a trend set to continue in 2019. Although the average Black Friday spend per shop declined around 7%, the high street could be set for a busier-than-ever event this year, with FIS data predicting a 4% spending increase in high street shops over previous years.

Amid reports of struggling department stores, Black Friday brings hope for retailers. Traditionally seen as bricks and mortar stalwarts, department stores presided over a massive 60% growth in online sales last year – a trend that looks set to continue in 2019 as shoppers shift to online offers.

But though Black Friday feels like the party the retail sector needs, retailers could be facing a serious hangover when it comes to returns. In fact, based on 2018 data from the Worldpay from FIS payments platform, post-Black Friday returns could reach £378 million in value – which may lead to some retailers facing cashflow and profitability challenges.

For example, high street electronics shops saw refunds spike by 46% last year in the week following Black Friday – more than double what was processed just a month before the big day. Although refunds tend to be less prolific online, electronics refunds from online sales also significantly peaked post Black Friday in 2018. This is also the case for clothing and footwear retailers, with last year’s data indicating that returns in the month following Black Friday could cost almost £100 million in lost revenue.

Pete Wickes, senior vice president, corporate, FIS, commented: “In today’s tough retail environment, it’s promising that Black Friday is getting more people out spending. What’s even more encouraging is traditional bricks and mortar retailers are driving huge growth through their online channels. Department stores may have had a tough year, but this data shows our high street staples aren’t out of tricks just yet.

“However, the mammoth spike in returns following Black Friday can’t be ignored. Unprepared retailers could face even greater losses due to processing and administration costs. To minimise this, merchants must have a strong returns strategy in place. Our data shows that 51 percent of people won’t buy from a retailer that charges for return shipping – so while you might be enticing a new customer in with a Black Friday deal, charging for returns will certainly ensure they don’t come back.”