Peak retail season: the cost of living and high volume returns
Ahead of Black Friday and the critical holiday sales period, our new study reveals timely insight into the cost of living for consumers – and merchants. From high return volumes to delayed refunds, the risk of significant financial shortfall is a key concern. However, tools like Pay by Bank can turn these pain points into advantages.
Tink’s latest data indicates increased consumer skepticism of Black Friday’s value, as merchants consider it a 'necessary evil' that puts margins under significant pressure.
40% of consumers surveyed are less likely to participate in Black Friday 2023, with 56% spending less on the overall festive season.
Returns and refunds are critical to merchants’ positive Black Friday experience, with an estimated 28% planning to invest more in returns processes like Pay by Bank.
With the start of this year’s critical sales period looming, our latest data indicates increasing merchant and consumer dissatisfaction with Black Friday. As the cost-of-living crisis continues to hit profit margins and disposable income, we surveyed more than 2,000 UK consumers and over 500 UK online merchants. The results? Findings reveal that 40% of consumers report they are less likely to participate in Black Friday this year due to the rising cost of living – and around two in three (64%) cut back on the amount of non-essential items they buy.
This appears to be a worrying signal for merchants looking to the period ahead, as over half (56%) of consumers expect to spend less over the festive season overall. Half (49%) of online businesses surveyed anticipate a weak peak season, while an estimated one in four (27%) are worried about bankruptcy or insolvency.
The challenge of seamless refunds
Returns and refunds are a critical ingredient of a positive Black Friday experience for merchants. According to our research, 46% of merchants say customers are returning more items than ever before. More than half (51%) agree that a strong returns process is pivotal to Black Friday success.
Moreover, the businesses surveyed say that almost a third (31%) of items ordered on Black Friday were returned last year. Based on consumer estimates of an average Black Friday spend of £472 in 2022, our research suggests that on average, almost £150 (£146.40) of each order was returned last year.
A particular sticking point in the returns process is repayment settlement, as one in three (33%) merchants say the length of time it takes for a customer to get their money back is an issue in the returns process. Meanwhile, nearly one in five (19%) consumers express concern that a delay in receiving Black Friday refunds this year will leave them at a significant financial shortfall.
Why returns processes are worth the investment
Despite cost pressures, merchants recognise the importance of ironing out the kinks in returns and refunds – over one in four (28%) plan to invest more in their returns processes.
Options for improving these customer payment experiences can be as simple as account-to-account methods like Pay by Bank. A hassle-free way for anyone to pay directly from their bank account, all the customer needs to do is authenticate using facial recognition, a fingerprint or something similar. The money then moves between accounts instantly. Pay by Bank gives consumers more choice – while letting businesses accept instant payments from anyone with a bank account, in Europe and beyond.
“It’s clear merchants and consumers alike are being hit with costs from all sides, and that will inevitably have a knock-on effect for Black Friday this year. A smooth returns process can make or break customer experience, especially when cost of living cashflow issues mean consumers need their money back as quickly as possible,” says Tom Pope, SVP Payments & Platforms at Tink.
“By investing in a solution like Pay by Bank, merchants can turn returns from a peak season pain point into a competitive differentiator. And it’s not too late for merchants to enjoy the benefits of Pay by Bank this Black Friday. For merchants already working with major PSPs like Stripe and Adyen, Tink’s Pay by Bank solution can be swiftly added at checkout to turn a major peak season challenge into a strategic edge as we embark on the year’s most important quarter.”
Businesses bracing for a 'Returns Thursday' are likely to see quick benefits if investing into enhanced payment solutions like this, as they improve the customer experience while reducing their own costs.
High return rates dull the shine of discount sales
Part of a broader trend of phenomena like Black Friday losing their shine for shoppers, the findings show consumers are steadily more sceptical of the value they get. Over one in three (34%) are less likely to participate due to regular discounts throughout the year. And findings from merchants demonstrate this isn’t unfounded, as almost half (48%) say the discounts they offer during Black Friday are not significantly better than other times of the year.
Despite 46% of merchants saying that Black Friday puts their margins under significant pressure and 43% agreeing that Black Friday no longer delivers the business benefit it once did, many feel they have no choice but to participate in Black Friday as 43% agree that it is a 'necessary evil' for their business.
A customer-centric solution
As mentioned, Tink’s research indicates that high return volumes are a pain point for merchants and consumers alike, leading to concerns about being left at a significant financial shortfall. However, an opportunity to ensure the best possible experience for everyone is there. With the help of real-time open banking technology, payments, refunds and returns processes can offer what people have come to expect – familiarity, speed, reliability and convenience. Ready to transform customer experience pain points into your competitive edge? Drop our team a line with this form.
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About the research
Consumer research was conducted by Censuswide on behalf of Tink in September 2023, amongst 2,000 nationally representative UK respondents.
Merchant research was conducted by Censuswide on behalf of Tink in September 2023 amongst 500 UK online merchants who sell online to consumers & are decision makers in the payments process.
Case studies, comparisons, statistics, research and recommendations are provided "AS IS" and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa Inc. neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The Information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required.
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