Insight Archives | Clear Returns

Five ways retailers can prevent returns on Black Friday.

Hard to believe, and yet peak trading time for retail is almost upon us again. And we know that despite all the talk of Black Friday ‘creep’ and customer apathy, Black Friday is still going to be one of the biggest days on the retail calendar for most.

This year we can expect the trend of increased shopping online to continue over the Black Friday/Cyber Monday weekend. Much more convenience for customers, and less chaos, crowds and mayhem, for retailers and customers alike.

In preparation for the surge in online traffic, a lot of effort will be directed to ensuring speedy website loading time (ideally, no more than 3 seconds), efficient checkout process, promotional stock availability, prompt dispatch of orders etc. All efforts directed towards optimising conversion rates and customer satisfaction.

However, with high sales come high customer returns, and many retailers receive a deluge of returns at the worst possible time - when peak trading is over. But there are some steps that can be taken to minimise these:-

Identify the products which should not be included in a Black Friday promotion. Womenswear in the UK, for example, has returns rates around 30%, but some categories of womenswear return at 60% of sales or more. Occasion-wear such as cocktail/party dresses, is one such category, and is already a popular seller pre-Christmas. Retailers really do not want these sitting on a customer’s bedroom floor for 30 days and arriving back as a return in January when these lines are marked down to clear.
Select affiliates carefully and reward them on sales net of returns. Affiliate marketing ranks high on the channels driving returns.
Don’t lead with returns. Instead of placing a prominent returns label at the top of the package, consider how an additional offer/incentive might attract customers into the store instead.
Household goods and gadgets sold particularly well last year, but return of electrical goods, in particular, incur high costs for the retailer. To reduce the likelihood of a return, based on the customer finding it too complicated to set up, or believing there to be a fault, follow up with a personalised email encouraging customers to connect via live chat or a call centre, if they encounter a problem.
Limited stock should be promoted to ‘keepers’. Segmenting customers based on their shopping and returns behaviour, allows retailers to target their most valuable customers and keeps limited stock/high-returning categories away from ‘serial returners’.

Want to know more? Contact us on info@clearreturns.com

How to protect your profits with ‘on-approval’ shopping

Whilst I was writing this article, a former Harrods colleague posted an article to LinkedIn from The Robin Report which identified the fact that the 18th century has never been more relevant for retail. I had been mulling over the fact that Victorian-era ‘on approval’ shopping seemed to be making a comeback, in various forms, as a way of winning and rewarding customer loyalty, and encouraging higher spend.

When I worked in Harrods in the 1990’s, there were still a few customers old enough to remember when ‘on approval’ was commonplace at their local ‘corner store’. Often, they were quite perturbed to find that we couldn’t dispatch their order without first taking their credit card details, charging it and then issuing a refund should they find it unsuitable. They didn’t wish to make a purchase, they just wanted to view a selection of merchandise that fitted their requirements so that they could decide at home whether anything was suitable or not.

Since that time, ordering online has dramatically changed the way we shop and customer behaviour on e-commerce sites indicates that this ‘on approval’ mentality prevails with some customer segments. Interestingly, it now seems that some retailers are not only encouraging this behaviour, but endorsing it.

Catering to their EIP customers, Extremely Important Person, (2% of the customer base but 40% of the sales) Yoox/Net-a-Porter is introducing a ‘You Try, We Wait’ service. The delivery of an order is not completed until the recipient has tried on the items and returned the unwanted goods to the awaiting delivery service. No payment is made until the customer has made their selection and, the inconvenience of returning is removed. Providing this level of customer service will of course be costly to the retailer, but, these are luxury items and the lifetime value of ‘EIPs’ should more than justify the investment. I wonder too if there is an added benefit to the retailer of handling returns more efficiently. With this service, there’s no delay in getting limited, expensive merchandise back into stock and ready to sell again.

Other examples include retailers, Threads and Enclothed. Their proposition is a ‘try before you buy’ service for men, who typically don’t like shopping. They take the hassle out of shopping, by shipping a clothing selection made by an online ‘personal stylist’, for approval at the customer’s home/work etc. The retailer must really get to know their customer, because the business model is not sustainable unless their customer keeps the clothes they recommend. The end goal is for the retailer to get so good at predicting what their customer wants that sales are maximised and costly returns are kept to a minimum.

Amazon, meanwhile, is introducing their own ‘try before you buy’ option with their latest offer ‘Amazon Wardrobe’ for Amazon Prime customers. This encourages customers to use their home as their changing room by ordering, without making an advance payment, and returning any items that are not suitable. To encourage more ‘keeps’ than returns, customers receive a 10% discount if more than 3 items are kept and a 20% discount if more than 5 are kept. Amazon is aspiring to make their online purchases as friction-free as possible but at the same time giving customers an incentive to be careful about their choices and ensure that each order remains profitable.

The end goal of these services is, not just to sell more, but to use personalisation and incentives to make sure that the customer ‘keeps’ what they buy. That seems obvious, but it’s interesting that Clear Returns has seen more mainstream ‘try before you buy’ methods drive up returns by encouraging impulse buying followed by buyer’s remorse. Often ‘Buy now, pay later’ payment methods, available at checkout, are not targeted and offer ‘on approval’ to all customers, even those serial returners who have no intention of keeping their purchase. As a regular online shopper, I’ve seen a steady increase of these types of payment options at checkout. This morning on a well-known, fast-fashion, retail site I was given the option of paying £1.20 to delay my payment by 20 days. Other sites use a popular payment method which allows customers to delay payment for up to 30 days, or to pay in installments. These payment options are there to increase conversion rates, but are encouraging customers to buy more than they want, because there’s no up front charge and returns are free. If you also add a free shipping threshold (e.g. shipping is free for orders over £50) then the customer has an incentive to buy more than they want and return the unwanted items later with no additional cost.

So, for retailers who want to increase sales with ‘on approval’ shopping without damaging profits - what’s the solution?

Understanding your customers sales and returns behaviour is key. Clear Returns uses niche, predictive analytics to identify retailer’s ‘keepers’, ‘explorers’ and ‘serial returners’ so that retailers can balance a competitive service with the profitability of making the sales in the first place. Clear Returns gives retailers an informed, holistic view of returns with a detailed understanding of who is returning which products, and why, and provides actionable insights that accelerate gross sales, reduce operational costs, improve stock availability and increase retained revenue.

The critical customer insight gap that is killing retail profits

The most dangerous information gap currently facing retailers is a robust and realistic view of why a customer really returned their purchase. Not why they said they did. Or why you suspect they did – but robust, quantifiable and most importantly actionable insight.

Ecommerce return rates of 30% to 40% are common for some retail categories, with tens of millions of pounds of stock locked up every day for large retailers. It is not a sale until the customer decides to keep it. But whereas pre-purchase literally every click the customer makes is scrutinised, the causes of returns are typically assessed from a few codes on a returns form, along with an organisational assumption of the product or delivery likely being at fault.

The purchase to return insight black hole is intimately connected to damaged profitability. Returns have a disproportionate impact on the bottom line – so reducing a return rate by just 1 percentage point can boost gross profits by 1.6% and operating profits by a massive 15%.

Returns are not inevitable or unavoidable - if measured and understood they can be managed and reduced, resulting in increased profits and increased customer satisfaction and loyalty. And once fully understood, they can be reduced without impacting top-line growth.

But trying to solve the problem without deep insight around cause and customer motivation is inefficient, speculative and risks that the customer’s profitability is jeopardised.

Specialist returns insight is essential, because this is a highly complex interplay of customer, product and marketing causes requiring cutting edge big data analytics. Clear Returns have done nothing but returns data modelling and analysis for almost 5 years and we’ve learned a few important things I’d like to share for those thinking about tackling this in house.

With the DIY approach to returns analysis, 3 things typically happen:

The retailer usually looks to the product and its depiction first – because looking to the customer is far harder and complex. Low hanging fruit can be found, but change can be slow and insights can’t usually be generated and actioned fast enough for a big commercial impac
A lot of effort then goes into attacking the symptoms not cause - eg fault testing, new returns reason codes, delivery or policy changes, sizing and fitting room technologies. This can be costly, time consuming and yet the ROI remains elusive. You’re very busy dealing with returns but still not seeing those efforts translate to the bottom line
Most marketing efforts continue to focus solely on the sales conversion without realising the real point of purchase – the new final stage of the sale - is the keep/return decision that is made in the customer’s home. Therefore marketing efforts can drive returns even higher and profitability downwards. And at the same time, there is often internal resistance to targeting for keeps or enforcement of returns policy in case you’ll damage the top line and send customers elsewhere.

Not true……you can improve both the top line and operating profits if you truly understand the causes and impacts of returns.

We’ve learned – after trillions of data points and hundreds of thousands of iterations of our predictive models - that the secret to solving returns and boosting profits is shedding illumination into the knowledge black hole that represents the customer and product interplay that occurs between purchase decision and return decision.

Clear Returns uniquely and specifically focuses here because prediction and very early warning means that once fully understood, returns can be strategically and proactively managed to boost customer profitability without impacting top-line growth.

Talk to us to learn more about Clear Returns Insights and data technology – Our CEO Vicky Brock will be demo-ing in London on the 8th and 9th February so drop us a note if you’d like to meet up!

Returns & why they should be on the retail CSR agenda

It really pains me, and I know it pains many people, to see the sheer amount of packaging and waste that goes into a delivery of a product ordered online.

I realise there’s a trade-off between the amount of packaging in the box and the quality of it on arrival. You don’t want to compromise on the packaging to the extent that the delivery arrives damaged, so it’s safer to over-package. But of course, that has a huge cost and environmental impact.

These hidden social costs are even extreme when there is a return involved. E-commerce returns for fashion in the UK average 30%. They can exceed 60% in Germany. You’ve got the customer opening all of this, so the packaging is very rarely in a condition that can be reused or salvaged for a future despatch. Not only that, if there is a return in that package, the shopper is going to be repackaging or bundling it up to go back in a van to go back to a warehouse where it’s got to be opened, cleaned, repackaged and finally made re-available for sale. That may involve it having to be transported to a different warehouse or back to store.

There’s potentially a significant loss of margin in that process. Packaging, road miles, you know, environmental impact, social impact all the way through this process of a return, yet alone the business impact from things like reduced margin, poor customer experience, and impact on profitability.

CSR and returns

It is this aspect of the social, economic impact, environmental impact of a return that both the shopper and the business are failing to give adequate consideration.

I believe a retailer serious about its CSR (Corporate Social Responsibility) will be arguing to the rest of its organisation, arguing to the board, ideally even educating some of the customer base, that returns at their current level are not sustainable. You are not doing anybody a favour - including the customer when you are incentivising them to return and shop with the intention of returning - because there are all these hidden costs.

These hidden costs are not necessarily borne by the retailer. They’re not necessarily borne solely by the shopper but they are ultimately borne societally. The cost of a van going two or three times to deliver a parcel because customers are frequently out, the cost of then picking that parcel up from the post office, or from the customer, back to a central warehouse, the cost of all the stuff that’s going on at the central warehouse, the product then being shipped by road to another warehouse where it gets back into the supply chain. The cost of buying more stock than required, simply to keep availability due to the sheer amount of stock out on loan. And the waste involved in packaging and re-packing the same item time after time.

Potential impact on consumer behaviour

It is common to see returns having a £30+ cost associated with them and that’s just direct costs of the handling, delivery and packaging, let alone externalities of environmental impact and waste. What I would like to see is organisations like John Lewis, Marks & Spencer’s and IKEA, who’ve been very forward in talking about CSR, environmental impacts and how they’re doing ethical sourcing, to also start talking about ethical returning.

Incentivising people to buy more and more, and return more and more is not, in my view, sustainable or ethical, and I think if the shopper was more aware of how much product goes literally into landfill, the r0ad miles generated, how much packaging goes to waste, how much stock gets cleared off the jobbers for disposal at a fraction of the cost price - they would be concerned and they would probably look at their own returning decisions.

Focussing the CSR agenda to include returns

I work in this industry, I’m obsessed with the data and I’m aware of what’s happening - but very, very few people are. So, it’s really important to me that returns get on the agenda of corporate social responsibility and that this is one of the things that CSR directors and retailers are talking about in the coming years.

Because returns at this level are not sustainable for anybody, not at business level, not on an environmental level and not at a wider society level.

Clear Returns build up to Customer Returns Summit 2015

Clear Returns CEO, Vicky Brock, discusses her attendance at the 2015 Customer Returns Summit in London on the 21st-23rd September.

Building on the success of 2014, The Customer Returns Summit is back for 2015 and is bringing together the most senior reverse logistics experts from leading retailers that include Debenhams, Shop Direct, Tesco, Panasonic, Argos, Sony and more. Clear Returns is pleased to be a sponsor at the event in 2015.

Clear Returns, CEO, Vicky Brock on why this is a significant event in the retail calendar:

“I think it’s incredibly important that there’s a retail industry event focused on what I believe is the biggest challenge for retail right now, particularly distance selling retail like e-commerce and TV shopping.

Returns globally is a £425 billion problem, £221 billion of which have been identified as preventable, which means if the retailers do something about it, if marketing is tackled, if customer processes/delivery is tackled, there is £221 billion worth of additional retained revenue on the table for retail profits.

Clear Returns are the industry leader in returns intelligence. It’s an absolute no-brainer for us to be there. Our absolute specialism and remit is that we help retailers identify, tackle and ultimately, prevent returns, and we do that by looking at the products, the customers, the marketing and the service processes that are driving up return rates, and more importantly, the interplay of those things.

Clear Returns are delighted to be attending the Customer Returns Summit once again and are looking forward to discussing many key aspects of developing customer experience and retail profitability in a multichannel retail context. We look forward to meeting others in the retail and supply chain who have reducing returns to a manageable level on their corporate agenda.”

Returns kill retail profits. Clear Returns offers a pro-active solution. So, why not get in touch?

Email: info@clearreturns.com
Phone: 01415544175