RETURNS AND RETURNS PROCESSING IS AN EXPENSIVE BUSINESS THAT IMPACTS THE BOTTOM LINE SO WHAT ARE RETAILERS ACTUALLY DOING TO UNDERSTAND WHY PEOPLE ARE RETURNING?
Improving returns rates and returns processing and handling offers huge potential for financial gain since getting goods back on sale more cheaply and efficiently helps to maximise their second sell through price whilst keeping the customer happy either by replacing a product quickly or addressing their concerns about a product is also important.
It is something that retailers must address if they are to survive in the ever changing world of retail, according to Jan Vels Jensen, chief marketing officer at Trustpilot. “Businesses looking to achieve high performance need to be able to address the twin challenges of both returns prevention and returns processing,” he says.
This involves a change in attitude for some however. "the first thing manufacturers and retailers can do is to stop thinking of returns as a normal cost of doing business,” he says.
But getting to the bottom of returns and therefore getting a better grip on handling and reducing them --relies on retailers actually understanding why returns are happening in the first place.
If they don’t understand how and why customers are returning product after all they can’t get to the bottom of the defective product purpose issues that are causing returns.
Although our survey showed that retailers used an array of methods to collate information about their returns we wanted to know how, and indeed, if they were actually analysing such data to reveal more about their business. Did they know and understand why customers were returning product and were they therefore doing anything to solve such challenges within their business?
The results showed that retailers still face a number of operational challenges when dealing with returns that urgently need to be addressed but, which in the majority of cases, are surmountable challenges.
Retailers were asked to tick all the reasons why their customers returned goods. The challenge of delivering product that the customer can neither touch nor feel was, unsurprisingly, the biggest reason that goods were returned and is a particular problem for fashion retailers where such challenges are even more prevalent.
Of those who replied nearly half (47%) of respondents said that returns happened because product had not matched customer expectations and nearly a quarter (23%) said it didn’t match the description or imagery shown on the website.
Descriptions are vital to keep returns down – especially for a business such as Fox’s Outdoor whose success relies on giving customers the right information in the first place. "We keep returns down by trying to give customers as much information regarding the product as possible to try and avoid a gap between the customer’s expectation and the product itself. We only offer higher quality goods which reduces the chances of faultyitems,” says manager Andy Young.
At catalogue retailer Boden the company works hard to ensure the reality of its products matches as closely as possible its descriptions and imagery both on its website and catalogue. For retailers such as Boden who only have limited or no store presence this is of course if vital. "The main driver for returns for us would be the product is not as described or as the customer feels. Sometimes it’s true and sometimes the customer has misunderstood what has been sold,” says Boden’s custome service manager Peter Hutton. "Colour is difficult because colour shots on the internet or in brochures can change dramatically but we are always improving our photography and have an in-house studio in London where we do colour matches,” he says.
Retailers in our online survey also said that they were working hard to understand and address problems of returns caused by poor product descriptions or imagery. "We are offering better listings and more pictures and also capturing feedback for each return so that we can amend listings if applicable,”said one retailer.
Jonathan Smith, head of returns at IForce , says that his company is working hard to help retailers improve their marketing and ensure retailers descriptions are as relevant as possible. "It's all about the description of product.
There is a lot of work where retailers are trying to keep that product sold,” he says.
Another said it was about also about making descriptions clearer and easier to read rather than overcomplicating. "We are simplifying online descriptive text because customers don’t bother to read more in-depth descriptions,” said one respondent.
For fashion retailers fit is always going to be fit is always going to be an issue for returns particularly for those selling to an international customer base for whom both body size and shape can vary dramatically. "We are always looking at fit to see whether there can be some change but it does vary country to country,” says Hutton. A lack of confidence is sizing - or simply a desire to find the very best shape for a customer unsure of her own size – will also often see customers over order to ensure the best fit which in itsel will lead to returns as a customer won’t keep multiple size versions of the same product.
Liam Price, digital merchandiser at Warehouse , says this is the main reason for returns for his business and is also the reason why the company has introduced the Metail fitting room app on its desktop and tablet site to combat any ambiguity its customer has over choosing her size. "We are seeing positive effects so far," he says.
A number of retailers are introducing such size fitting tools and regularly review their fit options too. "We re-examine the size and fits on all garments such season i.e. twice a year," said one respondent to the survey. We mentioned earlier that much of the problem of returns comes from shoppers over ordering and then returning product making the buying decision in the comfort of their home or office rather than online. Our survey showed that nearly a third (32%) of retailers said customers were returning product becouse they had over ordered.
Vicky Brock, CEO of Clear Returns, believes there is a clear move to customers making the buying decision at home rather than online - not simply to ensure fit but also to ensure the customer has chosen the very best product for their neeeds and is not being forced into a buying decision without having had a chance to examine and compare purchases in the flesh at their leisure.
"The biggest impact on return has been that the sale isn't the end of the process of customers. They donn't decide they have bought it until they have made the decision they will keep it at home," says Brock. "We saw it with fashion to start with but it's now moving to more extensive categories," she says.
The challenge is on knowing the limit that allows you to either encourage or discourage such buying patterns. "You've got to be extremely confident in your ability to manage it and still make your margin if you are going to encourage that behaviour," she says. Data and analytics is, she says, vital in this process.
She says that retailers need to do more with their data to better understand their returning customer and their own particular needs beyond simply the exchange or refund of a product. "Look at your data and understand at a product level wheter the approach you are taking is in the best interest of your business and your customer," says Brock. "It is only one segment of customers that do the 'bring everything to me and I will decide' shop. There are others who will just want it right so however good the returns expereince is the fact they have had a return is a negative expereince," she says.
We therefore also asked the respondents in our survey how they collected data and analysis from their returns. The results made shocking reading. Nearly half (43%) of retailers surveyed said that they tracked returns and captured the data from them but missed a trick by not utilising or analysing the information from them. Sitting on such a valuable mine of information is ludricous practise since analysing returns from a data point of view can give the learnings required to improve returns rates and processes.
The survey showed that a further quarter of respondents (28%) relied on single systems they had built themselves to capture and analyse data. A further 18% captured and analysed data in separate system - meaning cross matching and analysis of the data will be harder than in a single system. Only 11% of respondents captured and analysed data using third party system built for the job.
Quite why retailers aren't doing more to get to the root of returns is somewhat puzzling. Though the focus for retailers is naturally on sales there are big wins to b made from understanding and addressing returns too.
But again some retailers believe there is only so much they can do since consumer error can also play a part in returns. "We put as much information as possible on the website about the product but it will not eliminate all returns because some people won't read it or make wrong assumptions," said one respondent.
Understanding return is key. At fashion retailers Hobbs marketing director Clare Dobbie says that getting to the root of why people are returning is one of the biggest returns challenges a retailer faces. "It's about getting honest, accurate reason for returning," she says. This is easier said than done but retailers are doing more to get there. Once a retailer understands those reasons it can do something about them.
What retailers in our survey said they were doing to combat reasons for returns
- Better listings, more pictures and feedback for each return
- Increasing quality control
- Deleting products with repeated quality issues
- Shooting on models and providing clearer sizing charts
- Looking at 3rd party tools
- Improving packaging
- Using more careful couriers and working with courier networks to reduce parcel damage.