“The customer is always right” is the mantra ingrained into retail for decades, but some online fashion and beauty retailers are taking back control over their returns policies to improve profitability.
To its customers accustomed to spending and sending back hauls of merchandise, fast-fashion retailers such as Asos are chiming in: “not so fast.” In April, while Asos extended its return and refund policy from 28 days to 45 days (the customer is only eligible for a gift voucher after 29 days), the retailer added a fair use change, deactivating accounts of disproportionate returns behavior.
Where there is “unusual behavior” (aka serial returning, wearing items and returning after snapping Instagram pictures or ordering hauls of clothes with explicit intent to return a majority of items), the retailer has made its policy known, but stresses the “change is really unlikely to affect you,” on its web site. Of note, the return policy changes came prior to the retailer’s latest quarter report, which showed an 87 percent profit plunge.
The retailer also implemented proactive policies including try-before-you-buy initiatives — “fit assistant” and “style match” — to curb returns. But with the right tech platform, infrastructure and continuous customer feedback in place, will the impact of serial returners still be felt?
“Over time, most retailers are realizing that this returns issue is a serious problem and a major threat to profitability,” said Antony Karabus, chief executive officer of HRC Advisory.
Firm Boundaries, Anchored in Data
Citing data from HRC Advisory, the online return rate is slowly creeping up to profess a “significant and detrimental impact on retailer profit,” Karabus said, adding that he believes excessive returns are “largely due to fit issues as well as customers buying multiple sizes and colors and returning those they don’t want.”
Karabus said “online retailers need to establish firm policies for returns” to mitigate the negative impact on profitability caused by excessive returns, but in this policy incentives such as free returns for a specified time or only on goods of salable quality is advisable. Karabus also advocates for a firm cutoff of so-called “serial returners.”
Isolating individual customer data helps to identify these customers. “It is important for the retailers to track purchases and returns by customer,” said Karabus, “and when particular customers are returning more than a certain percent of their original purchases, they need to be communicated with to determine what the problem is and, at some stage, they need to be cut off,” he added.
“Changing return policies has the potential to harm all consumers, both great consumers and problem returners,” said Tom Rittman, vice president of marketing at Appriss Retail to WWD. Rittman reiterated that Appriss Retail has relied on data science for more than 15 years, offering the insights to both brick-and-mortar and omnichannel retailers. “Using data science, instead, to review each shopper’s purchase and return history and make decision from the data is the way to resolve profit issues,” Rittman said.
Technology is key, according to Rittman, in determining whether a return from a specific consumer should be allowed. By intelligently handling return consumers with artificial intelligence and data science, Appriss Retail has helped retailers reduce return dollars by 8 percent and reduce shrink by 13 percent. “This return dollar reduction preserves net sales, and helps retailers retain revenue and profits,” Rittman reiterated.
Change, for customers, isn’t always good when it means a shift in a very lenient returns policy. But there is always a place for customer-friendly service, according to Carly Llewellyn, senior director of marketing at Optoro, a returns optimization platform.
“Customer-friendly return policies can drive customer loyalty and engagement. In a survey, we found that 97 percent of consumers say that a positive returns experience will drive them to purchase again,” cited Llewellyn.
As for policy, she recommends a 30-day return window, according to Optoro’s own research, as the optimal choice for retailers, as it provides “enough customer flexibility, while not encouraging consumers to return used products.” From a logistics standpoint, the most profitable path may be telling consumers to simply keep the item, in the case of low value items. Retailers such as Nordstrom boasts a limitless return policy, handled on a “case-by-case basis,” and Amazon has a 30-day return policy for most items.
Llewellyn adds that “by using a returns optimization platform, a consumer would be given the correct path for the returned item, whether that’s keeping it, sending it back to the retailer, or sending it to a donation or charity partner.”
Back to Fit
Excessive returns may be traced back to fit. Jessica Murphy, cofounder and chief customer officer of True Fit, a data-driven personalization platform for helping predict clothing size and fit, said the concern around rising returns is the “chief complaint we hear from retailers,” but warns that “changes to customer policies can create friction for consumers,” sometimes resorting in customers “not buying at all.”
But backed by True Fit’s data, Murphy said “the impact of ‘serial returners’ is not all bad — since many of these ‘serial returns’ are by the most profitable customers with net sales [after returns] of 3.6 times higher than that of the average shopper.”
Serial returners are serial spenders in most cases, so retailers should be wary of cutting off the wrong customers. “Excluding fraud, it’s hard to have one without the other,” said John Squire, ceo and founder of DynamicAction, a retail analytics solution.
With a recent 3 percent jump in returns for both the U.S. and Europe, according to DynamicAction’s latest retail index, retailers will need to fully examine their return costs and policies, as “all customers are not created equal,” according to Squire. The value is in keeping the best customers (who are 9 times more valuable than the average customers) and deciding which they can forfeit to competitors (the worst of which are 44 times less valuable than the best customers).
Do so with an informative set of content — including sizing, fit details and use instructions — while focusing on servicing the most profitable customers with incredible service, as Squire informed.
Similarly, Murphy agreed, “While ‘serial returners’ do have one of the highest return rates across all consumer segments, they also are the group that buys the most and drives a disproportionate amount of net sales.”
Thus, a change in policy, (whereby serial returners’ accounts are deactivated), or a highly restrictive policy can create “ill will and require the retailer to spend more on customer acquisition but reduce the loss on returns,” according to Jan-Christopher Nugent, ceo and cofounder of Branded Online.
As a commerce operating system, Branded Online provides solutions for brands such as Blank NYC, Bebe and Juicy Couture, among others. Nugent believes a detailed “tiered approach” is best for online retailers, anchoring belief into the 30-day no questions asked return policy. “Whatever the approach is, make sure it’s clearly outlined and easy to view,” he reiterated.
As to how Asos and fast fashion retailers are performing, Nugent added: “It’s not news that fast fashion is on the decline. If it costs more to return the product, perhaps the retailer should partner with a charity. Donate the product and receive a refund.”