yes, they know no-one in their right mind will post a £40 dress for £54 - so they get away with selling shoddy goods.
they may well be in HK, but have a uk distributer - basically just a person who gets stuff the in bulk and posts it out locally for them.
the fact that the return is because they sent the wrong dress, rather than just you changing your mind, then they must pay the return costs too - just because a seller writes on their listings 'buyer pays return postage' - does not mean they can get around distance selling regs
im having a similar problem right now actually - bought a dress - and they sent the wrong one.
i asked them to send the right one, or a refund including both sets of postage - and bizarrely they argued and argued saying it wasn't their policy to refund original postage costs - only the cost of return (but not recorded delivery)
i argued and argued back, on principle, that they are at fault, not me, so i should not be out of pocket, even by one pence.
eventually they have agreed to refund everything - because, surprise surprise, the dress i ordered is no longer available
(i suspect they sent the wrong one on purpose, hoping i wouldn't mind, as the one i bought became out of stock the day after i purchased it)
but they still had the nerve to moan because about 3-4 words were capitalised in my last email, saying mistakes happen, im only human etc
haha ... I had said the same thing about 4 times already!
i felt like capitalising the whole blimmin email! - it was like trying to get through to a rock!
she even insinuated i was lying and that i had received the correct dress ... i had to send her a photo of it, and a pic of the one i ordered, before she finally accepted it was different!
This is a uk address thankfully and the postage is only £2 but it was the principle of it.
i would tell them you will be launching a dispute, if they do not cover the return costs.
also say something like -
"I am happy to post it back to your uk depot if you can give me the address - I assume you have one, because clearly this item did not come from hongkong - in 3 days, and only cost £4"