Doing business in Germany is an attractive opportunity for fashion retailers and brands, but are you prepared for the return fraud that has become increasingly prevalent?
Germany is the world’s most attractive destination for retailers – this was just confirmed again by property agent CBRE’s 2016 edition of its survey, How Active are Retailers Globally?, of more than 150 global brands.
It reported that “35% of global retail brands polled said they would choose Germany as a market for expansion in 2016”.
However, while the incomes of German consumers and the market generally seem appealing, there are some less attractive features, one of them being consumers’ increasing habit of returning purchased goods. In the pre-digital world, Germans were fairly “well behaved” and usually returned items only when they had good reason to do so. However, this has changed dramatically.
GermanFashion, an industry association, has called return-related fraud a “national sport”, citing the example of a wedding dress being returned stained, obviously worn at the occasion, with the bold assertion that the customer only tried it on briefly.
GermanFashion cites the example of a wedding dress being returned stained, obviously worn at the occasion
Gerd Oliver Seidensticker, managing partner of the shirt-maker Seidensticker, confirms: “Previously, these cases happened now and then. We simply turned a blind eye and just sent a new shirt to the customer. But today the number of cases involving deliberate fraud have increased so much that we have to be rigorous.”
German law, in line with European Union regulations, accepts the right to cancel purchases made online – or otherwise via means of distance selling – within 14 days. It does not, however, provide for a general right to exchange or return goods purchased in physical stores.
That said, of course, retailers need to differentiate between acceptance of returns that are legally required – for example, in the case of a justified warranty claim, and returns that are acceptable to them, even where there is no legal obligation to take the item back – for example, when an item bought as a present that does not fit, an item does not look like the picture on the website, or several sizes were chosen and ordered online.
What a business considers as “acceptable” is at its discretion, and there may be good reasons to be rigorous or to be lenient. However, even the acceptance of voluntary returns is not without legal hazards. In Germany, there are issues with return policies that stem from the specific statutory provisions applicable to general terms of trade.
The handwritten note in a changing room that “swimsuits cannot be returned” would constitute a general term of trade
A single term, no matter in which form it is written, can be covered by these provisions as long as it is visibly displayed. For example, the handwritten note in a changing room that “swimsuits cannot be returned” would constitute a general term of trade. Limiting the right to return goods in this manner (here, to all items except swimsuits) is not a problem, as the acceptance of returns is discretionary in the first place. But, as often is the case, the devil is in the detail:
- By displaying the sign ‘reduced items can not be returned’, the retailer might want to say that only those items which are marked down are excluded from (discretionary) returns. However, a consumer might interpret this as implying that they have an enforceable right to return all other items (i.e. those at original prices).
- Many customers do not understand that the right to “exchange” goods (Umtausch) means that they can exchange the product for another at the same price or, by paying the difference, at a higher price. Only the right to “return” the goods (Rückgabe) would entitle them to a refund of the purchase price.
Clarity of return policies is of the essence.
Retailers need to look at their returns management carefully and make it part of their strategy in Germany.
Eike Fietz is a corporate and M&A partner in Pinsent Masons’ Munich office and has helped numerous international fashion businesses enter the German market