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.

 

The critical customer insight gap that is killing retail profits

The most dangerous information gap currently facing retailers is a robust and realistic view of why a customer really returned their purchase. Not why they said they did. Or why you suspect they did – but robust, quantifiable and most importantly actionable insight.

Ecommerce return rates of 30% to 40% are common for some retail categories, with tens of millions of pounds of stock locked up every day for large retailers. It is not a sale until the customer decides to keep it. But whereas pre-purchase literally every click the customer makes is scrutinised, the causes of returns are typically assessed from a few codes on a returns form, along with an organisational assumption of the product or delivery likely being at fault.

The purchase to return insight black hole is intimately connected to damaged profitability. 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%.

Returns are not inevitable or unavoidable – if measured and understood they can be managed and reduced, resulting in increased profits and increased customer satisfaction and loyalty. And once fully understood, they can be reduced without impacting top-line growth.

But trying to solve the problem without deep insight around cause and customer motivation is inefficient, speculative and risks that the customer’s profitability is jeopardised.

Specialist returns insight is essential, because this is a highly complex interplay of customer, product and marketing causes requiring cutting edge big data analytics. Clear Returns have done nothing but returns data modelling and analysis for almost 5 years and we’ve learned a few important things I’d like to share for those thinking about tackling this in house.

With the DIY approach to returns analysis, 3 things typically happen:

  1. The retailer usually looks to the product and its depiction first – because looking to the customer is far harder and complex. Low hanging fruit can be found, but change can be slow and insights can’t usually be generated and actioned fast enough for a big commercial impac
  2. A lot of effort then goes into attacking the symptoms not cause – eg fault testing, new returns reason codes, delivery or policy changes, sizing and fitting room technologies. This can be costly, time consuming and yet the ROI remains elusive. You’re very busy dealing with returns but still not seeing those efforts translate to the bottom line
  3. Most marketing efforts continue to focus solely on the sales conversion without realising the real point of purchase – the new final stage of the sale – is the keep/return decision that is made in the customer’s home. Therefore marketing efforts can drive returns even higher and profitability downwards. And at the same time, there is often internal resistance to targeting for keeps or enforcement of returns policy in case you’ll damage the top line and send customers elsewhere.

Not true……you can improve both the top line and operating profits if you truly understand the causes and impacts of returns.

We’ve learned – after trillions of data points and hundreds of thousands of iterations of our predictive models – that the secret to solving returns and boosting profits is shedding illumination into the knowledge black hole that represents the customer and product interplay that occurs between purchase decision and return decision.

Clear Returns uniquely and specifically focuses here because prediction and very early warning means that once fully understood, returns can be strategically and proactively managed to boost customer profitability without impacting top-line growth.

Talk to us to learn more about Clear Returns Insights and data technology – Our CEO Vicky Brock will be demo-ing in London on the 8th and 9th February so drop us a note if you’d like to meet up!

 

 

How to ‘rescue’ your customer after a return.

Thunderbird’s Tracy Island in 1992, Buzz Lightyear in 1996 (and again in 2010), Tamagotchi in 1997, Furby in 1998 and Bratz Dolls in 2002 – all the ‘must-have’ toy for Christmas. For retailers and manufacturers, it is notoriously difficult to predict which toy will surge in demand in the few weeks before Christmas and they will be frantically reordering and restocking to try to maximise sales at this crucial trading time.

This year the much-hyped Christmas sensation was the “Hatchimal”, (rrp £59.99) an interactive furry bird that hatches from a plastic egg and responds to children’s affection with flashing eyes and sounds, to the delight of the recipient.

Only, in many cases, it didn’t!

Unsurprisingly many, many disappointed parents of disappointed and upset children have expressed their frustration on retailer’s website review pages and on social media. Often, having invested considerable time to track down this toy, as it became scarcer and scarcer in the run up to Christmas, they have spent an emotional Christmas Day with a child who had a less than ‘magical’ experience with their lifeless gift.

Cue ‘Dead Hatchimal Owners United’ a Facebook ‘support group’ where exasperated customers have shared their experiences to try and find a resolution. And, despite the frustration, most customers have been reasonable: –

“I know stuff happens and as long as the company takes responsibility and addresses the issue, I have no problems. I write many reviews on websites, including many social media sites…. I will say I had a problem and the company resolved the problem to my satisfaction” Facebook

However, customers are less understanding when they feel that their problem is not handled correctly. One customer in the UK expressed frustration when a retailer responded to her tweet with a website link for tips and tricks on how to get the egg to hatch. She had already explained that she had broken the egg open, so not only was this unhelpful but exposed the fact that the retailer hadn’t taken the time to read her message. Since it’s likely that they couldn’t replace the item (most retailers are currently out of stock) and could only offer a refund, perhaps an apology would have helped or maybe a discount on her next purchase.

Most customers dislike returning purchases and a return can feel like the retailer has let them down and inconvenienced them. For some customers, a refund isn’t enough –they want a personal response and they want to feel valued. If they are angry they may go to great lengths to avoid the retailer in the future.

So, what happens when the problem product isn’t a ‘must-have’ toy like ‘Hatchimal’, with a peak selling period, but one that is steadily dispatched to valuable customers who hate the inconvenience of having to return? Clear Returns predictive technology can provide retailers with a product alert ‘early warning system’. This picks up products that are returning at a higher than usual rate providing retailers with an opportunity to investigate and correct the problem before it escalates.

In addition, Clear Returns ‘Returns Rescue’ solution alerts customer service to valuable customers that are ‘at risk’ following a return, prompting a personalised ‘save’ response.

Clear Returns award winning returns intelligence platform merges key data from ecommerce, stores, and warehouse systems to target, retain and serve customers. When the information is available, it makes sense to use it.