Returns are costly to retailers, but online shopping and ‘fast fashion’ has fuelled their rise. Branwell Moffat, Director of Commerce Consulting at Envoy Digital, part of the KPS Group, looks at how retailers who invest in the right digital solutions will be able to tame the returns beast and ensure it remains a profitable part of their value proposition.
The latest research about retail returns has landed, and it makes for sobering reading. Ecommerce returns have nearly doubled in five years (up by 95%) and they are predicted to cost the sector $550 billion globally by 2020.
The reverse logistics chain has always been a costly beast, but without action there is a real danger free returns, could soon become unaffordable for the industry.
Take ASOS for example, this consumer favourite of the ecommerce fast fashion segment estimates that 25% of its UK women’s orders are returned, with this estimate rising to a massive 70% for orders in Germany.
But the good news is that savvy online retailers can turn this to their advantage.
Here, Branwell Moffat, Director of Commerce Consulting at Envoy Digital, part of the KPS Group suggests by investing in the right ecommerce systems and processes they can still ensure a generous returns policy is part of their customer value proposition, giving online shoppers more reasons to buy.
Fast fashion isn’t the only sector suffering from the returns burden. The latest research reveals that:
- Clothing and footwear is returned most, 75% of post-holiday returns fall into the clothing and accessories category.
- Electronics (27%) and shoes (23%) come second and third, meaning that clothing is returned nearly three times as much as the next two most prevalent product ranges, tipping the scales against the industry.
- Customers in Germany return over half (52%) of their online purchases, putting them top of the European returns league table; the Dutch come second, returning 50%, and UK consumers third, returning 41%.
- Nearly 60% of people say they return products because they are defective.
But a retail returns meltdown isn’t necessarily inevitable, there are steps that retailers can take to ensure returns, including free returns, remain a valuable part of their ecommerce business model.
The first step is to ensure that customers don’t need to return goods in the first place, and with 60% of customers saying products are returned because they’re defective, this could be as simple as enhanced quality control prior to shipping. In its simplest form this could mean ensuring products aren’t broken when they leave the distribution hub, and better packaging to ensure they aren’t damaged in transit.
The next step is to use data analytics to reveal patterns that could indicate certain items (often called toxic products) are more prone to returns and breakage and identify which third-party logistics firms are more likely to break items than others.
The third step is to ensure customers know exactly what they’re buying to start with, so their expectations are met, and they are totally satisfied with a product when it arrives. This demands greater care and accuracy when providing product descriptions and specifications and ensuring they are accompanied by high-quality photos and videos as supporting material.
Fit is also a crucial factor when addressing the fashion and apparel sector and there is a growing number of innovative digital solutions out there to address this challenge. Cutting-edge solutions such as TrueFit, My Size ID and Zozosuit harness artificial intelligence and data analytics to tackle the wide disparity of sizing across differing garments and brands and pinpoint the best possible fit for each individual online customer.
The returns challenge isn’t going away, so there are compelling reasons why ecommerce retailers need to implement steps like these to reduce the frequency of returns, but they also need to optimise their reverse logistics chain so that it is as efficient and cost-effective as possible.
Optimisation is essential if retailers are to take receipt of returned goods, process them so they’re suitable for re-sale and re-sell them in as short a timeframe as possible. To achieve this, retailers need a single view of stock and customer, so they know where every individual item is, in real time. This needs to work alongside the retailer’s accounting systems to ensure shoppers receive a refund as soon as possible, nurturing all-important customer loyalty.
The elephant in the room for many fashion retailers is that hardcore customers are routinely ordering and wearing purchases and then returning them, with no intention of permanently owning the product. This abuse of ecommerce clearly isn’t desirable or sustainable.
Artificial intelligence and data analytics can help identify these serial returns offenders and withdraw perks, such as free delivery, to claw back profitability.
According to research conducted by resource planning platform Brightpearl, which asked more than 200 retailers across the UK about the trouble they face, more than a third of shops have seen an increase in serial returns over the last year.
As a result, 45% of retailers, including Asos and Harrods, said they were planning to blacklist repeat offenders. Asos said it has checked the social media accounts of serial returners in a bid to catch out consumers who wear clothes before sending them back, and falsely claim they have not received items bought online.
In such cases Asos’ security team checks customers’ Instagram and Facebook posts to see if they have photographed themselves wearing the item.
The latest research, and other studies like it, have ensured returns are firmly in the spotlight. The retailers who invest in the right digital solutions to tame the returns beast and ensure it remains a profitable part of their value proposition will notice a significant competitive advantage over their peers who can no longer afford the luxury of giving customers what they want.
By Branwell Moffat
Director of Commerce Consulting