Marks & Spencer have attracted unwanted publicity in the last few days, as they have quietly adjusted their figures to reflect that their online sales over the past four years were £500 million less than previously stated.
Why? It all comes down to returns and how the business attributed them internally. Clear Returns regularly see retailers assign the full upside to the online channel – revenue growth, record sales figures, stellar marketing conversion performance – yet barely factor in the extraordinary downside, in the form of high returns. Frequently we see retailers like M&S fail to account for the full online returns picture, so returns to store and all the operation-wide associated costs of returned do not get fully reconciled back to the online business. This matters.
Returns from online are far higher than in store. They can exceed 35% for UK women’s fashion (and exceed 60% for fashion in Germany). Some of these goods are returned by mail or Collect+ - thereby incurring two way postage costs. But where the retailer has the store base, as half of online returns - or more - will get returned in store. These store returned goods rarely go straight back onto the shop floor – the store may not stock that range, the goods may need cleaning or repackaging, so they often require sending back to central warehouses to be processed which can take weeks. In the case of certain product categories - like electronic goods - they simply cannot be resold as new. Write-off rates are eye watering and this impacts the bottom line.
Yet depending on the level of information available internally around returns, the online channel may neither incur the costs for a high returning campaign or product line, nor see the data that would allow them to make changes to the way they buy or market goods in future.
And its worth remembering, that M&S’s £500million over the last four years doesn’t include the cost of marketing to acquire the sale that led to the return, it doesn’t include handling costs, it doesn’t include lost lifetime value from the customer finally fed up with having to return yet another order.
Clear Returns customers – and Marks and Spencer’s are not amongst them – do not have this problem. They can reconcile returns back to the orginal marketing activity. They can remove problem products from promotion fast. They can attribute refunds and returns costs to the correct channel. And they can make business decisions that grow retained revenue – thereby profits – across their whole business, rather than over-rewarding one channels performance at the cost of the whole business. Find out more