Many retailers required to shut down operations have kept their ecommerce stores open for the duration of New Zealand’s four-week lockdown, telling consumers that they’ll send the products out once the Government has decreased the alert level or “when possible”. It’s a clever workaround in desperate times, but is it worth the risk?
The Government issued a notice on Monday instructing all those not deemed “essential business” to close. You can read the full list of essential businesses here, but broadly, it excludes most retailers except supermarkets. Instead, retailers like Rose and Thorne Lingerie, Ballantynes and Scarpa are advising consumers they can still shop online, but their items will be dispatched post-lockdown.
Managing a buy now, receive later strategy
The key thing to remember when you’re taking payments online and deferring dispatch is to stick to what you’re promising. The Commerce Commission says under the Consumer Guarantees Act, goods should arrive “within the stated time frame or within a reasonable time if a date is not given”.
It’s not entirely clear what “reasonable” means in this context, but it appears retailers may be given some leeway due to Covid-19: “What is a ‘reasonable time’ depends on the surrounding circumstances. If international or domestic goods transport is disrupted or lockdowns are in place, this may mean that a lengthier than normal delay may be ‘reasonable.’”
If your customers’ goods don’t arrive within a stated or reasonable time frame, they’re entitled to reject the goods and ask for a full refund.
Katrina Hammon, partner at Wynn Williams, and Penny Birch, senior associate, say retailers must be careful to communicate clearly about their capabilities.
“Retailers of non-essential goods need to ensure their messaging to customers is clear and unambiguous, by making it clear that items will not be dispatched until the government restrictions have lifted. This must be communicated to a consumer before the consumer starts shopping – it would be misleading to advertise your ecommerce as ‘open for business’ but not reveal the full picture until the transaction has been completed.”
How to keep trading
Hammon and Birch say if a retailer does accept payment for goods that will be dispatched later, they should be very careful to communicate openly with their customers.
“Retailers should be clear and upfront that they will not be able to dispatch the goods until the restrictions have lifted, and ensure a customer is aware of this before the customer starts browsing. Retailers should also ensure they have the stock on hand to be able to fulfil any orders once the restrictions have lifted. If any items are out of stock or contingent on a third party delivering, we recommend that such items are not offered for sale unless the retailer can be certain they will be able to get them to the customer as soon as the restrictions lift.”
The pair recommends that given the current uncertainty, retailers may consider a broad no-obligations cancellation policy if the customer changes their mind. Retailers should be careful if charging any fees if a customer cancels their order, and ensure all money is refunded in full (and not just given as store credit). The cancellation policy should be communicated to the customer.
Greg Harford, chief executive of Retail NZ, recommends approaching this “buy now, receive later” strategy with caution.
“The situation is very unclear, and it’s not certain when level four will be lifted,” he says. “While it might help short-term cashflow to keep taking orders, retailers run the risk that they can’t deliver down the track and will need to refund customers under the Consumer Guarantees Act.”
From The Register’s perspective, it seems quite easy in this dynamic environment to run into trouble when effectively issuing IOUs to shoppers. For example, not every business has robust systems allowing them to accurately keep track of goods stocked and ordered – if the lockdown goes on for longer than anticipated, these systems could break down, landing you in a muddle.
There’s also the possibility of your stock becoming damaged while left unattended in a warehouse.
And of course, with rent and staffing costs ongoing but little cashflow incoming, very few retailers are likely to have the liquidity to handle a greater-than-average number of refunds once Level Four is lifted.
“This is an unprecedented time for retailers of non-essential services, given the uncertainty as to how long the restrictions will last,” say Hammon and Birch. “Retailers need to be careful to not offer goods for sale that they do not have reasonable grounds for believing can be supplied at all, or even if they can be supplied, cannot be supplied within a reasonable time.”
For those unwilling to take the risk, they suggest not accepting orders or payments, but instead inviting customers to add items to a wishlist. This prudent approach protects both the customer and the retailer.
What if you’ve been caught out?
In the current environment of uncertainty, it’s possible for retailers to unwittingly make sales that they can’t fulfil. If you’ve offered a product for sale in good faith and then found that you can’t get those goods to the customer after all, Hammon and Birch say you’re obligated to “make this right” for the customer.
“The best thing to do would be to communicate with your customers, and offer them the opportunity to cancel their order if they no longer want the item. If they do cancel, don’t charge any fees and ensure their money is refunded in full.”
Collaborate but don’t collude
In related news, the ComCom has issued a note telling retailers it’s happy they’re working together to meet New Zealand consumers’ needs, but they shouldn’t let this cooperation cross the line into collusion.
ComCom chair Anna Rawlings says her organisation is aware businesses are doing everything they can to help, and it doesn’t want them to feel constrained by the Commerce Act.
“The Commission has no intention of taking enforcement action under the Commerce Act against businesses who are cooperating to ensure New Zealanders continue to be supplied with essential goods and services during this unprecedented time. If you need to work with your competitors to share staff or distribution networks or take other measures to ensure security of supply, you are able to do this.”
“However, the Commission will not tolerate unscrupulous businesses using COVID-19 as an excuse for non-essential collusion or anti-competitive behaviour.”
Rawlings says this includes sharing information on pricing or strategy where it isn’t necessary in the current situation. The ComCom will post revised guidelines on its website shortly. You can find its Covid-19 page here.