If you want to know what issues are front of mind for today’s global retailers, all you have to do is ask. That’s what we did last week at our first European Unconference at XChange Berlin, where dozens of retailers gathered to discuss challenges and solutions with their peers. Top of mind – the plague of returns.
Returned merchandise is costly not only because a retailer loses the sale when an item is returned (assuming shoppers don’t make an exchange), but also because retailers must foot the bill for return shipping. Every retailer in the breakout group on returns grimaced when acknowledging that they offered free returns.
Worse still, retailers collect scant data on the reasons for returns, which, if better understood, could help them avoid a return in the first place. Retailers say that most shoppers simply check the first box in a “reason for returning” section, without even acknowledging what the reason is.
It’s no secret returns are a plague on the industry. According a National Retail Federation study of US and Canadian trends, 8% of all goods bought, worth more than $260 billion, are returned. To put that in perspective, “If merchandise returns were a corporation, it would rank #3 on the Fortune 500 list,” according to the NRF.
Retailers are trying to reduce the risk of returns by experimenting with guided selling tools, user-generated content and size guides aimed at ensuring a proper fit. But even that is not foolproof. One retailer, a jeweler, encouraged its shoppers to print out a paper ring sizer to accurately measure their finger. But people didn’t use the tool in significant numbers, and those that did were still ordering the wrong size.
This same retailer has the added cost burden of processing returns on earrings, which for health reasons cannot be sold to another customer and must be melted down and remolded.
Return rates on apparel are high, which retailers try to reduce with, among other things, high-quality imagery and detailed descriptions on fit. However, these helpful devices are offset by inconsistencies in sizing across brands – a size 8 in Brand A is not the same as a size 8 in Brand B.
Among retailers at the Unconference, there was interest in offering shoppers the ability to shop based on body type rather than size. Startup Fovo and fast-growing StitchFix are two companies that rely on algorithms and consumer-provided information to personalize the shopping experience, and increase the likelihood that the shopper will keep the purchased item. There was also discussion of using an online personal shopper/stylist to help guide selection and make a purchase, including uploading a picture of yourself so the stylist can make recommendations.
Another way is inquiring about how an item is going to be used. One major athletic brand said it would help to know if its shoppers were going to use its sneakers for trail running or track running, for example.
But if a return has to be made, retailers want to minimize the financial impact. How? One potential way is to offer incentives for returning to a physical store.
“It presents a good opportunity to get things right” with the customer and potentially save the sale, said one global retailer.
Another suggestion – guilt. Retailers discussed capitalizing on their customers’ eco-consciousness, reminding them of the footprint associated with return packaging and shipping.
In the end, retailers at the first European Unconference acknowledged the difficulty in changing consumer behavior, particularly when they’ve made it so easy to return. But free returns are the cost of doing business, as many consumers won’t buy if they can’t return for free.
What retailers can do, however, is leverage the engagement opportunity to save the sale. They can also replicate the in-store shopping experience as much as possible, with individualized recommendations, knowledge of past shopping behavior and guided selling tools – there are many out there and more on the way – that help consumers find the perfect product. Hopefully, one that they won’t return.