Following the pandemic and the cost of living crisis, small businesses have been hit hard. Now more than ever, they are in need of consistent business.
An impact on businesses often overlooked is customer refunds. Despite the loss of money, there’s also the issue of re-selling the product. With that in mind, card payment provider Paymentsense has looked at which regions in the UK are home to the biggest offenders when it comes to refunding, and the residents of London are one of them.
Small businesses in London suffer a loss of £129 a month due to customer refunds
According to Paymentsense’s report, small businesses in London lost a total of £129 a month due to customer refunds- just over £1,500 a year.
However, it’s not all bad news for small businesses in the area, as this number has actually fallen by 10.6% in the last year from £145.
Trade and trade supply businesses in London saw the most refunds in 2022
Within the report, Paymentsense also looked into which industries were the most affected by refunds by region. According to the data, trade and trade supply was the heaviest-hit industry in London in 2022. This includes anything from paint to hiring a plumber.
The data revealed that £1,363 was refunded per location per month- a huge 172.1% increase from the previous year. This totals over £16,000 for the year, which is a huge hit for small businesses.
Given that working from home has stuck with a lot of the UK workforce, it’s unsurprising that refunds for this industry have increased so much. With more time spent in our homes, investing in them has never felt more needed and thus the more we’re spending, the probability of returning items also increases.
Accommodation and travel businesses in London saw 204% MORE refunds in 2022
Based on Paymentsense’s data, accommodation and travel businesses include anything from trains to hotel reservations.
Both the percentage increase in refunds from last year and the value refunded per location per month are high with each location losing £933 on average monthly to serial refunders. This is somewhat unsurprising given that we were still transitioning out of the pandemic in 2022 with some still hesitant to go to crowded places, possibly contributing to the rise in refunds.
Will an overall decline in refunds continue for London businesses?
An expert from Paymentsense comments on the positive effects this has on SMEs in London, “Customer refunders can prove very expensive for small business, so seeing a 23.4% decline in refunds overall is a very positive thing for business owners. However, it’s likely that the reduction is a result of consumers spending less, thus needing to return less.
Despite this, we do know that retail sales volumes did grow by 0.5% in January 2023, following a dip of 1.2% in December 2022, according to data from the ONS. [1] Whilst this is positive, as the economical state of the UK remains unsteady, this number is likely to fluctuate but seeing a YoY reduction in refunds and an MoM increase in retail sales, overall, is very positive for small businesses in London.”
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