Predictive analytics is a top priority for retail

A recent study of more than 300 retailers released by SAP revealed that predictive analytics is almost universally seen as a competitive necessity in retail. At the same time, retailers noted that the pressure to keep up with big data has created a strain on employee knowledge and resources.

So what can retailer’s do? Installing analytics software can help, but that creates the additional task of training employees to interpret and apply predictive modelling tools to the business. This means costly and time consuming training in a highly specialist area, at the expense of these employee’s usual responsibilities.

Experts interviewed by Retail Times suggest that the increased need for predictive analytics expertise may cause businesses to selectively hire employees with knowledge of statistics and predictive analytics software and techniques. However, a shortage of specialists in this field makes this solution difficult to implement in the short term, plus these individuals may not have the necessary retail knowledge to interpret data in the most relevant manner.

Alternatively, the next step is to make use of new breeds of analytics software that turn big data into big insights, or more importantly actionable insights. Innovation in this space has led to more cloud-based, accessible tools which combine the advantages of big data with convenience, extracting the most important and relevant information – such as Clear Returns’ software.

This is one area to watch in 2014, as more retailers will continue to adopt new solutions to help them interpret their data faster and in more meaningful, actionable ways.

When ‘showrooming’ is a win-win situation

As more and more shoppers are constantly surfing the web on mobile devices, there has been an increase in what retailers and trade press are calling ‘showrooming’ – where consumers try an item in store and then check online to see if they can get a better deal elsewhere. A recent Retail Times article covered this very subject, warning retailers of the threat this behaviour poses. Many retailers are concerned this could undermine business, since their store may simply provide advertising for their lower-priced competition.

Many retailers are concerned showrooming could undermine business

However, research on shopping behaviour by the Clear Returns team shows that showrooming may actually benefit retailers who understand how their customers prefer to shop. One in every five returns can be traced to ‘overbuyers’, a subset of shoppers who like to buy a selection of items to try on at home, and then send the excess back, incurring a high cost to serve for the retailer.

Showrooming may actually benefit retailers who understand how their customers prefer to shop

Where overbuyers are involved, showrooming is a chance for retailers to create a win-win situation. Encouraging overbuyers to check out products and do their comparison in store saves on expensive shipping and returns. It also means these customers are happier with their final purchase. Also because of the cost to serve saved, this means retailers may even wish to offer incentives for certain showrooming shoppers to make their purchases now, rather than waiting to purchase online.

Does your returns policy miss the point?

This week I am in grumpy shopper mode.  I’ve been moaning all week.  Why?  Because my local supermarket took my nice new slippers away. OK, they didn’t come round and steal them in the night. I walked in and handed them over voluntarily.  But then I’d only had them for 6 days and one had completely come apart at the seams.

Still, I went in with a full bag, left with an empty one and now I have no slippers.

Yet, the supermarket couldn’t have been nicer! I had no receipt but in a matter of seconds I’d been given a refund card for the full purchase price (I’d bought them on a 25% off day), so I was £5 up straight away.  My credit card wasn’t checked, no data was recorded, my loyalty points weren’t referenced and the stock got put aside without any of my careful explanation being noted – meaning nothing will be done to ensure the problem is tackled.

I was back out the door in under two minutes.

So why am I moaning?

My feet are cold.  I have no slippers….

I didn’t want a refund card, even though I made a profit in the process (and the supermarket lost all margin) – it’ll just get used on groceries.  I simply wanted another pair of slippers. But I didn’t get that option.  Nor did the store layout make it possible for me to find new slippers before approaching the customer services desk. And I couldn’t be bothered to then go in and queue up to rebuy the slippers at the till for more than I originally paid – that just felt silly. So I’m still being a grumpy old bag four days later.

Yet I suspect that the supermarket thinks it did everything right.

A very generous no quibbles, no time limit returns policy and a process resolved in seconds.  All boxes definitely ticked. Surely I must be delighted? No! For most customers, real satisfaction is about keeps, not returns. I left with my primary need unfulfilled.  My feet are still cold.

They lost money and they lost my good will by doing everything their policy says is right – how many times a day is that happening across the country?

Perhaps its time to talk to Clear Returns about Smart Exchange to ensure more customers leave with full, not empty shopping bags!

Posted by Vicky Brock

Offline versus online – the key differences in consumer behaviour

Offline versus online, consistently the channels are being merged – but how different is consumer behaviour between channels? Clear Returns investigate.

A recent study of 2,000 consumers, reported in the Retail Times, found major differences in how men and women prefer to shop in brick and mortar stores. Women not only spend almost five times more per year, but also spend much more time comparing merchandise and trying on clothes. Men, meanwhile, tended to enter the shop on a mission, buy the item and leave, even though they were just as likely as women to consult a salesperson about their purchases.

Women spend 5x more than men and spend more time comparing merchandise

Interestingly, this pattern doesn’t necessarily hold true online. Research by the Clear Returns team shows that men and women behave similarly in the online retail environment, with the majority of shoppers spending similar amounts of money on similar numbers of items regardless of whether it was menswear or womenswear. This may be because many shoppers we interviewed said they found shopping in brick and mortar stores to be a fun day out, while online shopping may be more utilitarian. However this can also be true in reverse. Some shoppers enjoy no more than a browse of their favourite stores online and hit the shops when they are fulfilling a specific, pre-determined need.

Women were 16% more likely to buy extra items with the intent of choosing their favourites and returning the ones they didn’t like

One pattern does hold true, however. Women were 16% more likely to buy extra items with the intent of choosing their favourites and returning the ones they didn’t like. This mirrors the extensive comparison shopping seen in the study of shoppers on high street. Recognising this need can help online retailers adjust their website content to help their customers comparison shop without having to make a purchase and return.

Fight back against wardrobing – a particularly costly returns problem

A small group of shoppers are causing ecommerce retailers more than their fair share of returns pain.

Clear Returns has found that for some unfortunate retailers, up to 10% of returned product comes from a tiny proportion of shoppers who buy merchandise with the full intent of using and returning it.

The US National Retail Federation reports 65% of retailers are experiencing use and return fraud. Our data shows that to be an underestimate for ecommerce channels.

From dresses to drills, ladders to – yes – lingerie, “wardrobing” as it often referred to is particularly prevalent online. (After all, there’s all the convenience, plus you don’t even have to look anyone in the eye!)

Returns from online are also particularly costly – the goods don’t simply go straight back on sale as shoppers often assume.

Eyewatering costs

The costs the use and return shoppers generate as they indulge in their wardrobing (or shouldn’t that be shoplifting with added costs?) include two way fulfilment and postage, stock spoilage, repackaging, cleaning and margin impact. They keep product out of stock at the very point of peak demand.

They negatively impact the experience of other shoppers – causing lack of product availability and impacting product quality. A returned product is more likely than clean stock to get returned again, so the cost burden spirals.

And it is not just costs that your loyal customers are picking up – wear and returners are rumoured to be a health risk too and can cause brand damaging PR stories. Whether justified or not, Urban Outfitters, Abercrombie & Fitch and Victoria’s Secret have all been on the receiving end of bedbug scares that can potentially be linked back to returns.

Clear Returns’ Predictive Data Scientist explains: “Bedbugs don’t travel directly on skin, making it unlikely they spread by people who simply tried on an item in store and disliked it; rather, they more likely come into stores from people who kept items for quite a bit before returning them. (Luggage, mattresses and bags are particular bedbug favourites.)  Ongoing research by the University of Minnesota indicates that the most likely route of transmission of bedbugs into retail establishments is in merchandise that has been exposed to parasites outside the store (ie, via wardrobers)and deems the returns handling area as high risk.”

Bedbug scare stories may horrify loyal shoppers, but they are by no means to most irritating thing about the use and return problem.

This behaviour escalates if left unchecked

Clear Returns has found the typical seasoned wardrober sends back more than 20 items a year and their behaviour escalates once they know they can get away with it. Given a suitable returns window, they hold onto merchandise for longer than an average customer, meaning they keep the product out of stock longer, just when it is at peak margin potential.

Like shoplifters, many share information, including soft targets and tips to avoid detection. Wardrobers we’ve interviewed even admit they’ll deliberately damage a product in order to return it, if required.

So what can a retailer do?

Bloomingdales have famously gone for the high visibility label, but this risks driving up damaged product rates and doesn’t work for all product types.

Clear Returns fundamentally believes that the key to managing returns problems comes from understanding the root causes in a timeframe you can act on. The means assessing product performance and customer value based on what is kept, not just what is bought.

ECHO, Clear Returns’ management information tool, not only predicts which items will be returned, automatically alerting on the products having the biggest business impact, it also gives the retailer unprecedented insight into the type of shopper predominantly behind the returns of a specific product. This is essential in tailoring an appropriate response.

Loyal shoppers mainly return problem products, or those where there was an expectation gap between what they ordered and what they received (including, but certainly not limited to, fit). Immediate action to tackle issues with these products reduces losses and improves customer satisfaction.

Wardrobers, use and returners – they’re different. Despite what they tell you, or the return reason code they check, there is nothing wrong with the merchandise that isn’t a result of it being exposed to them. A different set of responses are required.

Like credit card fraud analysis, Clear Returns looks at ecommerce returns fraud in forensic detail. We do the “big data” heavy lifting for you. Using SEER, which looks at distinct patterns of behaviour in what shoppers actually keep, we identify the wardrobers already in your business, so you can change tactics. And we spot them as they buy online – giving you control over what happens next (including the option not to fulfil the order, or not to accept the return).

Wardrobers are a tiny segment of shoppers who are having a disproportionately high impact on returns, business profits and customer experience. It’s not cheek, it’s fraud – and we have the information to help you, the retailer, fight back.