Fighting the flood of returns

E-commerce Fighting the flood of returns

Published on 11.05.2021 by Stephan Lamprecht, journalist

Return deliveries are still a big problem for online retail. This is especially true for the fashion industry, where the return rates are particularly high. This article talks about the ways in which retailers can deal with this issue.

The EHI Retail Institute regularly looks at the number of returns in online retail. Statistically, the fashion sector has been impacted at levels that are way above average for years. This is a huge problem for retailers.

Effort, costs, damage

Online retail is finding it difficult to deal with a problem of its own making. Many retailers advertise “free” returns that are actually free only for their customers. But it is retailers who must bear the costs for often unnecessary double transportation. In some cases, these “try before you buy” orders are also part of the business model, for example with Amazon’s Wardrobe service. With this in mind, no one should be surprised when customers make intensive use of available services and incorporate them into their purchasing habits. Fashion retailers sometimes report a returns rate of 50 percent. Every percentage point by which this can be reduced is an enormous step towards greater profitability.

Because returns (whether granted voluntarily or simply used by customers) cause an enormous workload and therefore costs. Starting with double costs for transportation, the goods must also be checked and processed, if necessary, and then reintegrated into the inventory management. Not to mention the hidden environmental costs for us all. In the worst case, the returned goods can no longer be sold and have to be written off.

High-tech solutions for excess returns

There are no reliable statistics on the proportion of “deliberate” returns, i.e. cases where customers only ordered the products “to try them out”. The most commonly specified reason is that the product did not meet the customer’s expectations or did not fit.

Therefore, one approach that fashion retailers should not ignore is the continuous optimization of their product descriptions. Better photos, panoramic shots, simple descriptions that also explain technical fashion terms are all options.

Not every visitor to an online fashion shop is a fashionista who knows the precise shade of a given colour designation or has an in-depth understanding of how specific tailoring cuts will actually look.

The awkward issue of getting the right fit remains, however, and that won’t be so easy to deal with. Fashion retailers have different strategies for dealing with this issue.

Companies such as Presize, FitAnalytics or Fision from Zurich offer their services to fashion retailers. What they have in common is that they use AI-based computer models in the background to determine the best fit for their customers. The technical approaches are very different. Sometimes customers have to measure themselves by taking a “selfie” with their smartphone, or they have to answer a few questions about their size and figure in the online shop. The software then determines a computational model that combines historical data, returns, customer feedback and dimensions from the manufacturer in order to recommend the optimal size.

In some cases, retailers’ proprietary solutions are also based on AI and machine learning. The reasons for returns are evaluated and assessed with relation to the overall data. BonPrix, which belongs to Otto, uses its own AI models in its shop to offer the optimal size.

Even the “little things” can have a big impact. If a customer’s history shows that they send back models from a certain manufacturer more often due to the wrong fit, the shop can ensure that products from that manufacturer do not end up at the top of that customer’s search hit list.

Guiding customer behaviour

Since there is no such thing as a free return, the simplest and most obvious solution to the problem would be to add a fee for returns. This is a step that most retailers still shy away from for fear of competitors who continue to offer free returns. With growing interest in sustainability, the argument of climate protection could also have some weight.

AI technologies and software-based size advisors are currently still just scratching the surface in the area of sizing. One approach that is already available to any (fashion) retailer is to attempt to guide the customer behaviour.

To ensure customers do not feel penalised or even patronised, returns are not charged for, but customers are rewarded for not sending goods back too often. What this might look like is limited only by retailers' imaginations. Free shipping for a certain period or shopping credit: rewards of this kind can play their part in actively preventing the flood of returns.

Stephan Lamprecht, journalist

Stephan Lamprecht has been following e-commerce developments in Germany, Austria and Switzerland for two decades as a journalist and consultant.

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