Five ways retailers can prevent returns on Black Friday.

Hard to believe, and yet peak trading time for retail is almost upon us again. And we know that despite all the talk of Black Friday ‘creep’ and customer apathy, Black Friday is still going to be one of the biggest days on the retail calendar for most.

This year we can expect the trend of increased shopping online to continue over the Black Friday/Cyber Monday weekend. Much more convenience for customers, and less chaos, crowds and mayhem, for retailers and customers alike.

In preparation for the surge in online traffic, a lot of effort will be directed to ensuring speedy website loading time (ideally, no more than 3 seconds), efficient checkout process, promotional stock availability, prompt dispatch of orders etc. All efforts directed towards optimising conversion rates and customer satisfaction.

However, with high sales come high customer returns, and many retailers receive a deluge of returns at the worst possible time – when peak trading is over. But there are some steps that can be taken to minimise these:-

  1. Identify the products which should not be included in a Black Friday promotion. Womenswear in the UK, for example, has returns rates around 30%, but some categories of womenswear return at 60% of sales or more. Occasion-wear such as cocktail/party dresses, is one such category, and is already a popular seller pre-Christmas. Retailers really do not want these sitting on a customer’s bedroom floor for 30 days and arriving back as a return in January when these lines are marked down to clear.
  2. Select affiliates carefully and reward them on sales net of returns. Affiliate marketing ranks high on the channels driving returns.
  3. Don’t lead with returns. Instead of placing a prominent returns label at the top of the package, consider how an additional offer/incentive might attract customers into the store instead.
  4. Household goods and gadgets sold particularly well last year, but return of electrical goods, in particular, incur high costs for the retailer. To reduce the likelihood of a return, based on the customer finding it too complicated to set up, or believing there to be a fault, follow up with a personalised email encouraging customers to connect via live chat or a call centre, if they encounter a problem.
  5. Limited stock should be promoted to ‘keepers’. Segmenting customers based on their shopping and returns behaviour, allows retailers to target their most valuable customers and keeps limited stock/high-returning categories away from ‘serial returners’.

 

Want to know more? Contact us on info@clearreturns.com

Harrods

How to protect your profits with ‘on-approval’​ shopping

Whilst I was writing this article, a former Harrods colleague posted an article to LinkedIn from The Robin Report which identified the fact that the 18th century has never been more relevant for retail. I had been mulling over the fact that Victorian-era ‘on approval’ shopping seemed to be making a comeback, in various forms, as a way of winning and rewarding customer loyalty, and encouraging higher spend.

When I worked in Harrods in the 1990’s, there were still a few customers old enough to remember when ‘on approval’ was commonplace at their local ‘corner store’. Often, they were quite perturbed to find that we couldn’t dispatch their order without first taking their credit card details, charging it and then issuing a refund should they find it unsuitable. They didn’t wish to make a purchase, they just wanted to view a selection of merchandise that fitted their requirements so that they could decide at home whether anything was suitable or not.

Since that time, ordering online has dramatically changed the way we shop and customer behaviour on e-commerce sites indicates that this ‘on approval’ mentality prevails with some customer segments. Interestingly, it now seems that some retailers are not only encouraging this behaviour, but endorsing it.

Catering to their EIP customers, Extremely Important Person, (2% of the customer base but 40% of the sales) Yoox/Net-a-Porter is introducing a ‘You Try, We Wait’ service. The delivery of an order is not completed until the recipient has tried on the items and returned the unwanted goods to the awaiting delivery service. No payment is made until the customer has made their selection and, the inconvenience of returning is removed. Providing this level of customer service will of course be costly to the retailer, but, these are luxury items and the lifetime value of ‘EIPs’ should more than justify the investment. I wonder too if there is an added benefit to the retailer of handling returns more efficiently. With this service, there’s no delay in getting limited, expensive merchandise back into stock and ready to sell again.

Other examples include retailers, Threads and Enclothed. Their proposition is a ‘try before you buy’ service for men, who typically don’t like shopping. They take the hassle out of shopping, by shipping a clothing selection made by an online ‘personal stylist’, for approval at the customer’s home/work etc.  The retailer must really get to know their customer, because the business model is not sustainable unless their customer keeps the clothes they recommend. The end goal is for the retailer to get so good at predicting what their customer wants that sales are maximised and costly returns are kept to a minimum.

Amazon, meanwhile, is introducing their own ‘try before you buy’ option with their latest offer ‘Amazon Wardrobe’ for Amazon Prime customers. This encourages customers to use their home as their changing room by ordering, without making an advance payment, and returning any items that are not suitable.  To encourage more ‘keeps’ than returns, customers receive a 10% discount if more than 3 items are kept and a 20% discount if more than 5 are kept. Amazon is aspiring to make their online purchases as friction-free as possible but at the same time giving customers an incentive to be careful about their choices and ensure that each order remains profitable.

The end goal of these services is, not just to sell more, but to use personalisation and incentives to make sure that the customer ‘keeps’ what they buy. That seems obvious, but it’s interesting that Clear Returns has seen more mainstream ‘try before you buy’ methods drive up returns by encouraging impulse buying followed by buyer’s remorse. Often ‘Buy now, pay later’ payment methods, available at checkout, are not targeted and offer ‘on approval’ to all customers, even those serial returners who have no intention of keeping their purchase. As a regular online shopper, I’ve seen a steady increase of these types of payment options at checkout. This morning on a well-known, fast-fashion, retail site I was given the option of paying £1.20 to delay my payment by 20 days. Other sites use a popular payment method which allows customers to delay payment for up to 30 days, or to pay in installments. These payment options are there to increase conversion rates, but are encouraging customers to buy more than they want, because there’s no up front charge and returns are free. If you also add a free shipping threshold (e.g. shipping is free for orders over £50) then the customer has an incentive to buy more than they want and return the unwanted items later with no additional cost.

So, for retailers who want to increase sales with ‘on approval’ shopping without damaging profits – what’s the solution?

Understanding your customers sales and returns behaviour is key. Clear Returns uses niche, predictive analytics to identify retailer’s ‘keepers’, ‘explorers’ and ‘serial returners’ so that retailers can balance a competitive service with the profitability of making the sales in the first place. 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 accelerate gross sales, reduce operational costs, improve stock availability and increase retained revenue.

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!