Many Happy Returns?
Returns By Emily Walker, January 19, 2018
Reading time: 4 minutes
What do eCommerce returns mean for retailers and what can they do about it?
It’s been a bit of a mixed bag for fashion retailers over the festive period; we’ve had multiple profit warnings, falling share prices and declining high street footfall. But, while the high street continues to struggle (the British Retail Consortium reported the slowest rate of growth in Christmas spending since 2012), this festive period was all about online.
To the surprise of many Analysts, high-street and online retailer Next released fairly positive results with overall sales increasing 1.5% in the run up to Christmas, driven entirely by growth in online sales of 13.6% (compared to a drop in in-store sales of 6.1%). SpendingPulse figures from Mastercard show a similar trend; while overall clothing sales increased 1.3% year-on-year during December 2017, sales in online clothing grew by a staggering 13.7%.
People have clearly been buying more clothes online, suggesting an increase in buying clothing as gift; a survey conducted prior to Christmas suggested that this year people wanted “sensible” presents – and for most people that meant clothing and shoes.
But buying clothes for people is notoriously difficult. How do you know what size to buy when so often people don’t know what size to buy for themselves? According to our research, whilst 85% of women would like to receive clothes as a gift, 47% of women don’t trust their partner to buy the right size for them. And now is the time where we see the evidence of that – Christmas shopping is over, the January sales are dwindling, people are left with a pile of poorly fitting clothes in the corner of their bedroom.
Many Happy Returns?
Year-round, the apparel industry sees eCommerce returns of between 20 – 60% and a consistent relationship between sales and returns; if sales increase, so do returns. Royal Mail are preparing for over double the December average for returned parcels and expect clothing to be the most commonly returned items.
Returns are now part and parcel of the shopping experience; consumers expect minimal hassle and cost when returning unwanted items and as competitive pressure grows, retailers can’t afford to lose customers due to poor return policies. In a recent survey, 48% would shop more with retailers that offer hassle-free returns.
The importance of a good returns policy is even greater over the Christmas period. Gift shopping is hard and, as confident as you may be that your sister is going to love, yet another, pair of pyjamas, a generous returns policy provides a little extra reassurance for consumers and thus a boost to sales. Retailers seem to have accepted that returns around the Christmas period are inevitable and respond to this by offering extended return periods; Warehouse, Debenhams, Asos and Zara are just a handful of retailers offering up to 3 months to return unwanted presents.
While consumers take this flexibility for granted, what does it mean for retailers?
Returns are costly; in Asos’s Annual Report they claimed that during 2016, when items have been purchased and packaged, 147 units were picked per man hour. This compares to only 39 units processed per man hour for returned items – returns are labour intensive and costly. There’s postage, processing, steaming, cleaning, re-packaging; in their 2017 full year results, distribution costs (predominantly delivery returns) accounts for 16% of Asos’s total sales – a whopping £300m a year – driven by “investment in free return propositions.” And these are just the quantifiable costs – there are also hidden costs that are much harder to determine.
According to the National Retail Federation, historically, 10% of all Christmas presents are returned and according to research by MarketTools, clothes and shoes make up between 60-65% of all festive returns.
We believe there are two key reasons that the majority of returned presents are clothing;
- People don’t like them, or
- They don’t fit
Unfortunately, we can’t make people buy better presents, but we can help with the second! At Rakuten Fits Me, we believe all consumers have the right to find clothing that fit and flatter their body, irrespective of size.
Rakuten Fits Me provides a full product suite for eCommerce apparel retailers to take the guesswork out of sizing and to personalise the shopping experience. This gives shoppers the confidence to find, buy and keep clothes that fit and flatter their unique body shape.
Our core fit recommendation product, Fit Origin, requires shoppers to simply provide their height, age, weight and select one of the calculated body shapes that looks most like them. This then suggests the best size to buy based on their shape and shows them how it will fit against their body. This approach has been proven to reduce fit-based returns, drive conversions and increase order values. One of our most recent clients, Mud Jeans, reduced returns by 38%.
To see first-hand how the Rakuten Fits Me tool can reduce your returns, book a demo here.