It’s that time of the year again, when along with the end of the year sales lift comes the rush of returns that follows. This is an especially interesting year for holiday sales, given the impact of Covid-19 on retail. According to a joint survey from video ad platforms Unruly and Tremor Video, 75 percent of U.S. adults intend to carry out at least half of their holiday shopping online this year.
Retailers, take heed. While our industry is making some educated guesses about how to appeal to online consumers during this holiday uptick, it’s important to remember that we could be facing a avalanche of returns following the holidays—and should expect a substantial volume of returns that will eat into the margin earned in November and December.
As is often the case in the retail and direct to consumer (DTC) industry, process improvements, not just technology, are the key to solving problems. We must prioritize these seven steps in an attempt to reduce returns (year-round) and their cost to our margins:
Returns as a loyalty benefit. Retailers could consider moving free returns (or more generous terms) to the loyalty program to make them easier to track against the total profitability of the customer. This is a great way to create a sticker relationship with customers, and many major retailers have already adopted this strategy. As loyalty programs become more common—among retailers large and small—it makes sense to reward loyal customers with even more generous reward terms.
Distinguishing between renters vs. buyers. Loyalty programs can also be used to build a profile of what is known as the “renter.” For example, an Instagram stylist might repeatedly buy clothes for a single unbranded photoshoot before returning them. Using data to find, target, and ultimately, reward those customers who are frequent returners can help significantly reduce returns. For examples, focusing on the 20 percent of your customers who drive 80 percent of the returns—with direct outreach regards their returns and or tighter returns terms—will drive enough benefits to justify the investment.
Establishing return tiers. Another benefit of collecting the consumer-level data is the ability to establish a level at which the frequency of returns will merit store credit versus cash back. This merit system also incentivizes more purchases and can be an effective tool in helping to segment and address specific needs in certain customer tiers.
Reducing return costs. For returns from digital sales channels, rather than sending all apparel returns to a jobber, retailers could consider routing the returns of reliable returners—using the aforementioned data—to the store or distribution center and route returns from unreliable returners to a jobber to avoid “surprises” showing up and disrupting the store or distribution center.
Proactive size assistance. In digital sales channels, in addition to the virtual changing rooms, foot measuring apps, “true-to-size” guides can be a simple yet effective way to ensure that consumers purchase the right sized items. Retailers could also consider adding a feature that allows shoppers to request a live chat with a representative when they’ve added multiple sizes of a style or color into a cart. If the customer is unsure of correct sizing, a live chat might assist in reducing customer uncertainty and improving impulse conversion.
Designing for fewer returns. Ultimately, retailers should be mining their returns data to find common characteristics that drive high return rates. Perhaps certain fabrics, sizes, embellishments or packaging is not consistent or apparent when looking at style, color or SKU online. Investigating return rates can unearth these issues.
Prioritizing size transparency. For apparel, making it easier to identify the right size has been discussed for a long time. But retailers could also consider process improvements such as offering consistent sizing from collection to collection, or they could endeavor to better understand the real sizing of your core customers in petite, missy, plus size and big or tall when it comes to stripe or pocket placement.
The battle of returns really starts with the merchant, not the buyer. Renters will always be among us, but with some small steps, we can make substantial strides with reducing their wear and tear on supply chains and margins.
Matt Jones is the vice president, Global Retail Solution Consulting & Product Strategy at Infor. Having worked in this sector of Infor for four years, he is an expert on identifying market needs, conceptualizing solutions, and serving as an executive sponsor for retail customers. Due to the nature of his work, Jones is innately focused on future industry trends such as digitizing the consumer shopping experience post-Covid and the what the future of the retail industry looks like as department stores close, malls struggle to reopen and the eicommerce system booms. Prior to working at Infor, Jones spent nine years working for Oracle’s retail global business unit. He is currently based in Sacramento, Calif.