Complex issue of returns perplexing for fashion retailers

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Brought to you by Retail Insider and K3 Retail

Reducing returns is an objective of every online fashion retailer and as the level of returned items is expected to outpace the growth in online sales the problem looks set to grow. But it would be a mistake to reduce returns at all costs as this would undoubtedly lose a retailer sales volumes.


No returns probably equals no sales

The fact is customers prefer to shop at a retailer with a more flexible returns policy – so while this will result in more goods being returned it also ensures the merchant attracts business in the first place. MetaPack found a hefty 91% of online consumers check returns policies before making a purchase and that 81% would choose to shop at a retailer with an easier returns policy. As many as 51% made the decision not to shop at a retailer having disliked the returns arrangements.

Returns are therefore rather like online security – retailers can ensure zero fraud if they choose to do so but the offset is that they will also likely reject lots of legitimate business and maybe if they move to the extreme end of the scale then they would have no sales at all.

Somewhere in the middle is the ideal. With returns retailers should focus on those areas where no business will be lost. The obvious area is to investigate the sending out of the wrong goods or faulty items, which when combined account for a sizeable 16% of total returns – according to City analysts Bernstein in a recent note.

Even making a small impact here can deliver seriously positive financial gains for online retailers. Asos has stated that a mere 1% reduction in returns would save it around £10 million (equivalent to 1% of sales) per year. This highlights how there is a sensible way to start attacking returns, while not losing sales to rivals who offer more relaxed policies.

It will likely become even more important an issue over time because Verdict predicts that online returns will grow at a CAGR of 10% between 2015 and 2020, which will be greater than the sales growth achieved across the market. For clothing and footwear the situation is more acute as the CAGR is forecast at 12.7%.

With returns in UK clothing averaging around 25-35% of sales this is an issue that will have to be treated with extreme care as the balance between losing sales and cutting return rates is very finely balanced.

Glynn Davis, editor, Retail Insider

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.