IMRG Connect – it’s all about the customer

Some of the UK’s leading fashion retailers joined industry association IMRG and their members for IMRG Connect this week – here Clear Returns deliver their round up of the event.

One key focus throughout the day emerged – the customerHow should customers be measured – in terms of margin or overall value?

There was debate over how customers should be measured – should it be in terms of margin or overall value? WhileQubit discussed customer lifetime value – however this was based only on customer’s purchase history. Astley Clarkethen discussed the work they have undertaken to personalize the online experience for their customers, including personalised product recommendations based on purchase behaviour – which now account for 6% of their online sales.

The day closed with some retailer case studies from ASOS and Moss Bros, where again the customer was the key priority in terms of providing multiple options and tailoring communication. Moss Bros’ Ecommerce Director Neil Sansom told the audience how close they were to achieving a single customer view, thanks to joined up systems delivering real-time information to a their new CRM. Very soon, a customer will be able to walk into their store and the staff will be armed with their full profile and purchase history.
For a true picture of customer value retailers must take returns into account

Clear Returns propose that for a true picture of customer value retailers must take returns into account. A sale is not a sale until a customer decides they are going to keep an item. Therefore by basing recommendations and marketing on purchase history only, you could be missing the full picture.

Certain customer segments, while purchasing full price items regularly, actually return between 80-90% of what they buy. Therefore while they may appear to be your most important customers, in reality they are the least profitable – taking advantage of free shipping offers and promotional codes and costing you more money in the long run. By utilizing this kind of information within your CRM system, you can tailor your marketing much more effectively and profitably.

The new Quarterly Fashion Returns Review in partnership with IMRG was launched

Clear Returns also launched their new Quarterly Fashion Returns Review in partnership with IMRG at the event. This report is designed to give retailers the ability to regularly track a range of key benchmark metrics to help you monitor, assess and address the issues surrounding returns and their effect on profits and logistics. If you would like to receive an exclusive preview of the report then get in touch, and all IMRG members will receive full access.

Internet Retailing returns research results

In partnership with Internet Retailing, Clear Returns have taken part in a three month research project to uncover retailers current challenges and concerns around returns. Here we give our verdict on the results.

42% of retailers return rates have risen over the last 12 months, which is unsurprising as retailers online sales continue to grow, so will their rate of returns.

While free returns can build trust and encourage bigger baskets it may simply be increasing your returns, since people can easily over order and return items

One key challenge all retailers face with returns are the costs involved. One third of retailers surveyed offered free returns on all sales, and while this can build trust and encourage bigger baskets it may simply be increasing your returns, since people can easily over order and return items. Clear Returns have identified certain segments of customers,’overbuyers’, who deliberately buy large baskets with no intention of keeping all of the items. While free returns is an essential part of retailers’ online offer, you should be aware of customer groups who abuse these policies and tailor your targeting to these customers accordingly to help minimise returns and maximise profitability.

Getting the sale right in the first place is critical to minimising returns.

“We want people to get it right first time so give as much information as possible to ensure they have ordered correctly. Processing returns is costly and a hassle.”

Failure to meet customer expectations was the main driver of returns for 47% of retailers, more so than poor fit. Retailers are currently searching for ways to combat this expectation gap, such as tailoring the amount and quality of product information onsite. This is where Clear Returns has helped retailers take proactive action by automatically alerting the appropriate teams to content issues after only a few returns are made, and delivering recommended actions to solve specific issues.

Another worrying result from the research is that 43% of retailers track returns and capture the data, but do nothing with the information. This is a crucial area for retailers to address in 2014. Making the most of the data you capture will ensure your returns process are more efficient and get stock back on sale faster – maximising profits as a result.

Keep an eye out for the February issue of Internet Retailing for more insight from the survey, and join us at the upcoming Returns Research Briefing on March 5th to hear from all the expert research partners involved.

Why retailers should wait for returns data before celebrating Black Friday

Many UK retailers said that Black Friday was a big success with Amazon UK selling 64 items per second on the day and consequently ‘winning’ Black Friday. But is the celebration of what seems like a huge surge in profits for retailers premature?

‘Despite all the fighting in the isles on Black Friday and Cyber Monday, it’s way too early to determine the winner of this match’, said Vicky Brock, CEO of retail returns company Clear Returns. ‘Until the returns data comes in over the coming weeks–and return rates could be as high as 50 per cent–it’s too early to tell who’s “won” these big sales days’.

Visa estimated that £360, 000 would be spent per minute in online stores on Friday, but after Clear Returns’ analysis, it could be that the fuss of big discount days placed right before Christmas might not be worth it for retailers.

The problem is in the way the discounts on these days are set up that make products especially likely to be brought back.

‘All the preconditions necessary to drive up returns are in place’, said Brock. ‘You have a time sensitive offer placed alongside a sense of scarcity and panic, which appeals to over-buyers who make their selection at home post-purchase and panic buyers who get caught up in the emotion of the frenzy and will likely later return the products they did not mean to buy in the first place’.

No respite will be offered by Cyber Monday as shoppers take to their favorite online stores and scroll through for discounts on their favorite electronics, avoiding the city center crowds. Online stores typically have a far higher returns rate and a higher cost of servicing returns than physical stores.

It has been estimated that around £650m was spent online on Cyber Monday. But one-third of online sales on any ordinary shopping day are returned, so imagine the difficulty online stores could face when you take the formula of big business sales days and combine it with online buys.

Retail Week recently estimated that 600, 000 unwanted presents bought on Black Friday and Cyber Monday will be returned by shoppers after Christmas. Post-Christmas returns are a huge loss for retailers, but at least it is an expected one What is not expected are the exceptional levels of hype-driven returns that will be flowing in during the days prior to this peak trading period.

Clear Returns says that we need to not only focus on post-Christmas returns because the timing of post-Black Friday and Cyber Monday returns us also seriously problematic for retailers who are busy fulfilling production during the days leading up to Christmas.

‘I do think we’re going to see peaks in returns just before Christmas and profits will tumble as a result, especially since returns are rarely treated as a priority. Returns are the things that often get tackled only after the warehouse has dealt with outbound fulfillment, meaning that those pre-Christmas returns are just going to sit there. There will be nowhere for the returned stock to go except into January sales or clearance channels’.

Once the costs of returns have been subtracted from the products sold on Black Friday and Cyber Monday, there may be some retailers who are putting away the celebratory champagne and really reassessing the effectiveness of it all.

Posted by Lisa Monozlai

Returns bad for retailers but good for the economy?

We all know the problems that returned goods cause retailers. From cashflow through to systems inefficiencies and other burdens, we know that returns are, generally speaking, a bad thing.

However, at this, the most-returningest time of the year, I would like to propose something a little different. Yes, at a retailer level, an increase in the number of returns almost mandates heavy discounting to keep the cash flowing. However, at a macro level, I would argue that returns are simply the more efficient allocation of previously misallocated resources. Which is a good thing.

Rejoice! Rejoice! Returns are a good thing!

Let me explain. Back in 1993 Joel Waldfogel set out his theory in the American Economic Review that, as recipients of Christmas presents did not value their gifts as much as the purchaser, this meant that upon receipt, between a tenth and a third of the monetary value of Christmas presents was effectively destroyed. Put simply, for example I think £20 for that novelty jumper is a price worth paying; you think it’s rubbish and, if pushed to buy the thing yourself, you would pay at most £15 for it. The other £5 you would have spent on something better.

What has happened here concerns efficient information and knowledge. When I buy for myself, I have good knowledge of my wants. But when I buy for someone else (eg at Christmas), that knowledge is less robust, hence the errors.

Waldfogel subsequently developed this theory further and you can read more about it in the 2009 book Scroogenomics.

So, back to my Christmas jumper example. You have bought me a horrendous £20 jumper. I appreciate the gesture but fundamentally I think it’s a waste of money. When your back is turned, I decide to take this woolly monstrosity back to the store and get a £20 refund which I then spend on something which I actually want. In other words, I purchase based on superior knowledge and allocate my resources accordingly. It might be petrol, it might be a less horrible jumper, it might be giving the money to charity; the point is that it’s based on something I want , not what you might imagine I want.

Originally, I wrote this post before Christmas but it’s worth drawing your attention also to this story from the Telegraph where it notes that,

“In a stark reminder of how tough things still are for low-income families in America, McDonalds has advised workers to dig themselves “out of holiday debt” by cashing in their Christmas haul.”

In other words, make more efficient use of the value of gifts by making them liquid and spending the money on something else.

clearreturnsjumpers

I’ll throw two further economic based observations into the mix to conclude. Firstly, ‘not wanted’ is usually the most common reason for return and this is generally from people that have been buying for themselves. This suggests that imperfect information flows are operating to cause returns to a large degree.

 

The second point is that returns are externalities caused by the customer’s behaviour. An externality as defined in Wikipedia is, “a cost or benefit which affects a party who did not choose to incur that cost or benefit”. A shopper returning an item sets in motion a process that costs the retailer, or society, but not the shopper directly. Externalities (such as pollution) are usually tackled in a way that means that the cost is attached to the polluter in some way and not bourne solely by, say, the local council, often by means of a tax.

The implication of this, of course, is that if return rates are to be reduced, these externalities need to be priced into the customer’s purchases or exposed in such a way that they influence shopper behaviour.

But that is a whole other subject we’ll explore in 2014.

Guest post by Stephen Scrooge Budd, Chief Product Officer, Clear Returns

Are you targeting the right customers with your email marketing?

Recent studies revealed today indicate that customers are increasingly receptive to email marketing techniques, but are you targeting the correct groups?

A recent study by marketing firm Alchemy Worx shows that consumers are highly responsive to email marketing, estimating that for every extra monthly email sent to a pool of 5 million customers, retailers can make an additional £1.8 million. Better still, the Direct Marketing Association has found that customers have become more receptive to email marketing, especially when the email contains information about coupons or special offers.

To maximise this marketing opportunity you need to be able to identify your best customers

To maximise this marketing opportunity, however, you need to be able to identify your best customers. Not just in terms of what they buy, but what they actually keep. Your normal and high-value customers, who make up almost half of your customer base, keep the majority of their purchases and may welcome a chance to stock up on their favourite brands, especially if they know they’re being rewarded for their loyalty. Other shoppers, specifically the over-buyers who buy large baskets with the intent of returning the majority of items, may simply use special offers as an excuse to place enormous orders– which then turn into a big pile of costly returns for you to deal with.

Being able to distinguish types of customers and exclude expensive, over-buying shoppers from certain campaigns allows you to maximise profitability

Being able to distinguish these types of customers from each other and excluding those expensive, over-buying customers from certain email campaigns allows you to maximise profitability. Plus letting your high-value shoppers know you reward their loyalty by offering special perks means a better shopping experience for them. Finally, the receptiveness of customers to email interactions means customer service has the opportunity to contact these over-buyers to help direct them towards less costly options, such as exchanges or personal shopping services to help them find the products they want.

Posted by Shaylon