What China’s new ‘fast refund policy’ means for luxury

Retail giants Alibaba, JD.com, and Douyin have adopted more stringent returns policies. It also means merchants are likely to face rising costs. The so-called “refund without return” policy is primarily aimed at countering rising competition from budget competitor Pinduoduo. Should luxury brands be concerned? Impact on luxury The policy differs from platform to platform. Alibaba's Taobao has updated its refund policy. Customers can now request refunds if delivery exceeds the agreed time, if items are shipped without consent, or if they reject a product after delivery. JD.com will offer an expansion to its refund policy. It will approve refunds pending a buyer's transaction habits in case of dispute and will allow refunds without returns in cases with "serious" quality issues. Douyin has allowed 'refunds without returns' as an option for vendors since September. This policy allows users to receive refunds immediately upon dispatching their returns, rather than waiting for the merchant to receive them. The new policy forces merchants to enable this option for items up to $211. Traditionally reliant on high-value transactions, luxury faces unique challenges because of the new policy. Consumers' increased ability to claim refunds could lead to higher operational costs for brands. To protect profit margins, some brands may hike prices or lower product quality, ultimately affecting the high-end consumer experience. From a consumer perspective, the policies are welcome for the security and flexibility they provide. “For users, this is a happy event, but for brands, it may be a nightmare,” @guorenerkeji wrote on Weibo. Merchants are concerned about potential abuse and any impact on product quality and pricing. Increased costs due to refunds could ultimately lead to higher prices. A middle ground where consumer rights are protected without damaging businesses in a sluggish market. A recent survey by RTG Consulting Group revealed that a mere 6.4 percent of Chinese consumers in Q3 of 2023 intend to boost their spending on luxury fashion and leather products. On the other hand, a substantial 55.1% of those surveyed are looking to increase their budget for travel and leisure activities. The impetus behind the policies is competitive pressure from Pinduoduo, which first adopted a “refund without return” policy in early 2021. Now, Alibaba, JD.com, and Douyin have implemented similar strategies. While the policies expanding consumers' ability to obtain refunds is a strategic move by China's e-commerce giants to stay competitive, its impact on the luxury sectors is multifaceted. “Ultimately, this policy may harm genuine customers, as it could prompt opportunistic buyers, leading merchants to raise prices,” as netizen @Cangzhou Jiaquan Jiance wrote on Weibo. “High-quality customers may be the ones who end up paying the bill.”

What China’s new ‘fast refund policy’ means for luxury

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Published January 12, 2024

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What China’s new ‘fast refund policy’ means for luxury