Customer behaviour can be changed – six billion plastic bags and counting.

Think of the progress UK retailers have made in reducing single-use plastic bags since the introduction of a 5p charge in October 2015.  This policy change has reportedly taken 6 billion plastic bags out of circulation and gathered £29 million for good causes (source).  These impressive results for the environment haven’t driven customers away, and the small penalty alone cannot be the reason that so many customers now ensure they regularly use a ‘bag for life’.  So what is this change in mindset telling us?

To  cultivate the progressive image that 21st century customers demand, more and more retailers  are focusing on sustainability and their impact on the environment.  Millennials, in particular, are attracted to companies who share their values and beliefs, and they expect brands to engage with them and to be socially aware.   A report last year recorded the fact that 88% of millennials and Gen X’ers want retailers ‘to do more good, not just less bad’ (HBR) and reputations can be damaged very quickly when retailer’s tech-savvy customers spread damaging reports on social media.

In response, many large retailers now have a Head of Corporate Responsibility or a Head of Sustainability function within their organisation.  This role encompasses political and ethical areas such as modern slavery and responsible sourcing but also environmental issues of reducing waste and improving the supply chain, which will ultimately cut costs too.  In the case of Debenhams, for example, reduction of carbon emissions is one of the KPI’s measured by their board – the 2016 Annual Report records a reduction of 12% on the previous year.

They are not alone in their efforts.  Last month H&M became the first International retailer to sign up to EP100 with ambitious plans to achieve a climate positive value chain by 2040.  Others, such as Shop Direct, N Brown and Tesco are undertaking initiatives to promote greater environmental responsibility and employ environmentally friendly technologies, becoming the first retailers to sign up to the  UN Global Compact.

Clear Returns advocate a similar strategy on returns – reducing costs and the impact on the environment through the reduction of transportation, warehousing and packaging.  With today’s customer-centric retail mindset, it involves something of a shift in policy.  Clear Returns focus on modifying customer behaviour with data analytics and small policy changes which can have a big effect on the bottom line.

Clear Returns’ specialist returns technology perfectly aligns with this growing, socially- responsible, trend.  Primarily to help retailers reduce the operational cost of dealing with returns, it also lowers the impact of e-commerce on the environment.  This isn’t a case of reducing sales, but ensuring that goods are not being regularly shipped and returned by customers who have no intention of keeping them.   Returns can be the next ‘plastic bag’ but, who will lead the way?

Are returns the biggest barrier to online profitability?

When working with retailers to reduce returns and sustain profit growth, we have two initial questions:-

 

Question 1. How much are returns really costing?

So not just expressed as a % of orders, but also in unnecessary fulfilment costs, wasted warehousing capacity, reduced stock availability, inefficient use of working capital, and so on.

Question 2. Are they being actively managed and controlled, or just being accepted as an inevitable cost of selling on-line?

Concentrating effort on reducing returns at the same time as growing sales can have a huge impact on profitability.

 

Example – Retailer A

We discovered that this retailer was spending £25 million a year shipping stock to and from returners to achieve zero sales.


Example – Retailer B

We calculated that reducing returns by 11% would have a greater impact on profit for this retailer than increasing sales by 20%.

It’s a complex area, with massive volumes of data to analyse.   Establishing who the genuinely unprofitable customers are, and doing something about them, without impacting the profitable ones, is key.

 

At Clear Returns we offer detailed returns data analysis and insights through to AI modelling to create direct data feeds for dynamic, customer level intervention.

Combining a market-wide view, award-winning returns insights software and a commercial focus – because it’s not really a sale until the customer ‘keeps’ it – Clear Returns reduce returns without impacting top-line growth. Clear Returns gives retailers an informed, holistic view of returns with a detailed understanding of who is returning which products, and why, and provides actionable insights that accelerates gross sales, reduce operational costs, improve stock availability and increase retained revenue.

 

We can enable significant reductions in returns and profit growth.

You can’t manage what you don’t measure

It’s not really a sale until a customer decides to keep it. Returns add up to almost 12% of revenue lost each year, on average, with an even bigger hit to profits. But retailers don’t really know the causes of those returns, their impact on conversion and how they affect customer profitability.

Every click the customer makes before they buy is scrutinised with digital analytics tools, whereas the causes of returns are typically assessed from a few codes on a returns form. Marketing efforts may actually drive up returns and costs. And effort gets focused on tackling the symptoms – not the causes. This impacts customer experience and lifetime value.

Returns can only be managed and reduced once they are measured and understood – which is where the Clear Returns Intelligence Console fits in. We measure the keep, not simply the sale and incorporate costs and gross profit. Meaning you understand how product, marketing, suppliers and customers are really impacting your business performance.

And once fully understood, returns can then be reduced without impacting top-line growth. This means increased profits, improved marketing efficiency and increased customer loyalty.

You wouldn’t run you sales and marketing activities without data – so why ignore the more critical information of all, what your customer actually keeps

Schedule your returns intelligence demo now!

It’s not you, it’s me.

How customer behavior is the biggest influence on retail return rates

When I founded Clear Returns, I did so in the guilty knowledge that I return at least 70% of what I buy. The purchase is only the start of the process for me – my buying decision only really starts when the goods arrive. And then the bulk of my order almost inevitably goes back.

As a data analyst, I knew that if enough others shopped liked me, then the numbers on which retailers base their marketing, policy, and stock buying decisions are fundamentally flawed.

Five years on, this company’s ability to predict and prevent returns continues to astound me. The only thing I underestimated was the extent to which the problem would worsen and the impact that would come have on retail profits. Many ecommerce retailers just experienced their highest return rates ever, and for some that is jeopardizing their commercial survival.

And yet, still, when the retailer thinks about tackling returns they typically look at product, fit, images, and operations. They assume the cause lies with them and can be fixed in the supply chain.

The critical question should really be

“did my customer ever intend to keep their purchase?”

Why? Because 75% of returns come from shoppers who may never have intended to keep all their order, they were simply choosing at home – often in direct response to marketing efforts that encourage them to do exactly that.

 

Why customer intent matters

Whether a shopper intends to keep or return their order is a highly complex, but highly predictive indicator.  And the proportion of “keepers” vs “returners” in the overall base of customers determines not only the likely return rate, but also stock efficiency and overall profitability. This is a worked example, based on real patterns, for a clothing retailer making £5.2m of ecommerce sales:

 

 

 

 

 

 

A keeper may still return – usually because something went wrong with the process or product. But they spent what they could afford and intended to keep their purchase when they made their buying decision.

A returner, on the other hand is likely to spend more and buy more often than a keeper – because they do not intend to keep everything they buy. They may overspend in response to discounts or to get free shipping. They are making their purchase selections at home – a very costly behavior.

As more of this group appear in the customer base – and the overall proportion of keepers falls – return rates and returns costs rocket. BUT, total revenue grows too. So, at first glance these returners seem like great customers and marketing attention flows towards them. Returners nearly always push keepers out of ad targeting and high priority segments, because they are responsive and spend more. But they can be less profitable than their keeping counterparts once costs are factored in. This gets compounded if stock is unavailable for keepers to buy, because it is locked up with high returners.

Unless a retailer has visibility on the costs of returns and the split of “returners” vs “keepers” in their base, their efforts to grow revenue can ultimately make the business less and less profitable.

 

 

 

 

 

 

 

 

 

 

Forget fit, focus on customers

The current fixation on fit and size is not going to transform retail return rates – you’re preaching to the choir when you focus remedial efforts on those who intended to keep anyway. Especially if at the same time your marketing efforts are disproportionately aimed at returners.

75% of refunds are typically coming from customers who didn’t intend to keep their whole order. And that is not necessarily bad. These returners include your most valuable shoppers of all, but they also include customers who cost you money every time they buy.

At Clear Returns we know the customer is the most significant place a retailer should focus in order to make significant improvements in return rates. Talk to us now about optimizing your retail business for keeps.

Returns policy personalisation – why one size never fits all

Many of the retailers Clear Returns indexes have just had their highest returning season ever. This doesn’t just damage profits, it hits customer experience and future revenue too.

The problem has become too big for retailers to ignore – which is why there has been a recent flurry of changes to overly generous returns policies.  John Lewis, for example, recently reduced its policy from 90 days to 35 days – a commercial necessity in an environment where a product cycle may be as short as 8-12 weeks. Other retailers e.g. Nordstrom and LL Bean, are rightly asking the question around whether it is sustainable to continue their free shipping and, “return anything you want, when you want to” policies, in an environment where returns rates are 30%+.

 

Returns have a disproportionate impact on the bottom line, so reducing a return rate by just 1 percentage point can boost gross profits by 1.6% and operating profits by a massive 15%.

 

At Clear Returns, our ground-breaking returns technology has helped retailers understand that returns are a fundamental, but overlooked, component of online shopping, and that different customers respond to returns in different ways.

Some shoppers happily buy first, choose later – their high returning behaviour is costly, but it doesn’t impact loyalty.  A very small minority abuse returns policies by returning worn, fake or stolen stock, or by deliberately damaging product – the retailer and the rest of their customers pay a very high price for this. Then there are the customers who hate to return and only do so if the retailer messes up – if they are not identified and treated differently to the ambivalent returner, they will likely take their business elsewhere.

A one size fits all approach to returns policy and customer service isn’t helping customers or the retailer, and is the area where there will inevitably be seismic shifts in thinking in the coming year.

 

The biggest challenge is knowing where to start. This is why Clear Returns now offers ecommerce and multichannel retailers a standalone Returns Insight package as a roadmap.

 

  • Uncover the real drivers behind your returns so you focus spend and effort.
  • Learn how your business compares against the industry so you can judge urgency.
  • Get robust data on the costs of returns to your business, and their impact on profits and customer experience, so you can measure the cost of inaction and identify priorities.
  • Understand your core groups of customers in terms of their attitudes and sensitivity to returns, so you can plan a more targeted service and policy approach.
  • See the areas of returns improvement and keep optimization that your competitors are already addressing.

 

Returns are not inevitable or unavoidable – if measured and understood correctly they can be managed and reduced, resulting in increased profit and increased customer satisfaction and loyalty. With Returns Insights you’ll be on the path to tackling the real causes of your returns in just 6 weeks.