Why is Black Friday making retailers blue?

Originating in the U.S. as part of the Thanksgiving holiday celebration, Black Friday discounting arrived in the U.K. in 2013 via Walmart affiliate, Asda, and, as other retailers followed suit, has quickly become a key date in the UK shopping calendar, with electronics and fashion items especially popular. This year it falls on the 25th November with bargains available online from midnight, but for retailers the one day shopping bonanza is not entirely welcome and debate continues about the sustainability of this annual event.

In the U.S., where it all began, there is concern over Black Friday ‘creep’ in which the focused day of shopping after Thanksgiving has begun to spread into Thanksgiving itself as retailers attempt to win as much market share as possible. Others, such as Mall of America are making a virtue of closing on Thanksgiving, showing respect for the holiday and for their employees, to win public approval. Sports retailer REI will close on Black Friday itself, encouraging customers to “#optoutside”, and hopefully make their purchases for ‘opting outside’ throughout the rest of the month.

In The Guardian newspaper, David McCorquodale, head of retail at KPMG, explains the negative impact of building up customer expectations for a big discount day at the end of the month – “Last year, Black Friday was bigger than Christmas, with promotions running over four days, so people are holding off spending and that diminishes retailers’ sales in the weeks before and after”

In the U.K. retailers are aware that it is a difficult trend to reverse with so much revenue generated in one day. Fashion retailer Jigsaw, not wishing to participate, but recognising that there is customer expectation, has explained their position in their pricing manifesto. By sticking to traditional bi-annual retail sales they hope to reassure their customers that the quality products bought at full price one week will not be slashed the next and that reductions in the sale will be end of season stock only. Ted Baker boss, Ray Kelvin, was quoted in Retail Week saying “No-one wants Black Friday” – they would prefer not to be involved but their concessions in participating department stores makes it difficult for them to avoid.

The concern, particularly with fashion retailers, is that customers have been educated to expect discounting when they could previously rely on full priced sales, and to maintain momentum up until Christmas, promotional discounts will need to continue throughout December. With the weak pound affecting consumer confidence, customers are also more likely to be seeking out bargains and shopping around for the most competitive prices.

Also, heavy traffic in stores – sometimes requiring crowd control measures – resulted in an increase in online shopping in 2015, putting pressure on websites (slow or crashing) and pressure on distribution centres across the country. In addition, the spike in sales produced by the ‘flash sale’ nature of Black Friday also resulted in a spike in returns adding to supply chain pressures with extra handling and fluctuating stock levels.

As Vicky Brock, CEO of retail technology firm, Clear Returns, explains “The result is businesses frequently face a period of time in which they are short of stock while it is out in the supply chain or being considered by customers. The challenge with Black Friday is where it sits in the year – that final weekend of November. Typically, the cycle of returns becoming available to sell again is 15 to 21 days, so that stock, if everything went well, would just about be re-available to the retailer to sell on 20 December – past peak Christmas trading.”

As Black Friday looks set to remain a prime shopping day, and spreads around the world – Souq.com in the Middle East runs its version ‘White Friday’ and Alibaba in China has the massive Singles Day – it seems unlikely that this trend will reverse any time soon. So how do retailers retain their most loyal and most profitable customers and avoid a deluge of costly, margin-shredding, returns at their most important trading time? Retailers can reduce the impact if they think carefully about the products they are promoting – returns are higher risk in certain categories and sub-categories than in others. They should also consider that products are likely to go out of stock as a consequence, and, considering customer time to return and the retailers processing time for returns, unlikely to become available for sale in time for the Christmas peak. Future sales to customers who would keep these purchases are then lost and the returned stock ends up in the post-Christmas sale, with a low margin and all the added operational costs – including premium Christmas delivery and expensive warehousing.

Clear Returns award-winning predictive data technology focuses marketing on the customers who will keep their purchases. Keep optimisation is a solution that eliminates marketing driven returns by encouraging costly customers, who sit on premium stock, away from these purchases towards products they will keep and releases the stock for profitable customers thereby preventing returns, reducing costs and increasing margins.

Everyone knows a serial returner

Why are retail returns such a great conversation starter?  I start by telling someone about my new job at Clear Returns and invariably receive a response such as “You should speak to my mum, she orders stuff constantly, keeps nothing, returns the lot”.  It seems everyone knows someone who is a serial returner.

 

Customer-focused retailers have educated and incentivised this behaviour, with free shipping and returns and direct mail campaigns with sales, promotions and voucher codes.  Now they are waking up to 1 in 3 items being returned and all the associated loss of profit margin, operational costs and fluctuating stock levels.

 

When I talk to my friends about their online shopping intent, they reflect back the shopping behaviours retailers have encouraged:-

 

“When  I buy from ASOS, I’ll buy much more than I’m intending to keep as if you spend over a certain amount, you get free delivery. And I like trying it on – even though I don’t keep it!”

Jo, Glasgow

 

“Emails with extra discount always good….Nike are great for it. Usually order a couple of sizes as can’t be bothered doing an exchange. Order much more than I ever keep!”

Nina, Glasgow

 

“I’ve just bought a dress for black tie event – ordered 6, kept 1”

Jen, Edinburgh

 

“I also buy items in different sizes, and return some/all. I’m a sucker for a sale.”

Lesley, High Wycombe

 

“Love click & collect too! To return stuff. Won’t buy if returns not free”

Lindsay, Glasgow

 

For some customers though, returns are just an inconvenience-

 

“I buy everything online and usually not more than one of the same thing cause I hate having to go to the post office to return it.”

Kate, London

 

But there are also products that customers never, or rarely return-

 

Ever return beauty stuff? “Nope because I always buy the same brands”

Lisa, Glasgow

 

“Homewares is a different scenario altogether. You know exactly what you’re going to get cause you’ve seen it in nearly every shop but can’t be bothered carrying it around. Home-wares 0% return”

Julie, Dundee

 

Now imagine, a retailer having this level of insight on every customer who buys online. Instead of marketing campaigns focusing on sales only,  products can be targeted to the customers that will keep them.  Because it’s not a sale until the customer keeps it.

 

Using big data analytics, Clear Returns matches customers to the products that they keep, reducing returns and saving profit margins.  Clear Returns can predict, before the point of purchase, the likelihood of the customer keeping the product with 96% accuracy.   

 

So not only will the retailers reduce costly returns but they will increase personalisation, improve the lifetime value of their customers and ensure that stock is available for the customers that will keep what they buy.  

 

Kay YoungKay Young
Senior Account Manager
Tel: 0141 554 4175
Email: Kay@clearreturns.com

Do you really know your customers?

Returns & Personalisation

Do you really know your customers?

Next time you are with a group of girls sharing a bottle of wine, open a can of worms and ask them if they return much of what they buy on-line.  It sounds like a conversation killer, but you can bet the next round of Jagerbombs that your jaw will hit the ground when you hear what a few of them get up to on-line.

I know (because we have the biggest returns data lake in the known universe) that if your gang is typical of the market, you will probably have the following groups:

 

Buy and Keep Katie

Katie is tech savvy and transacts with efficiency. She has a busy lifestyle and although loyal will be brand promiscuous.  She tends to know what she wants and is emotionally neutral.  She can buy little and often or have bundled splurges of purchase, but she never buys with the intention of returning any of her items.  We should all love Katie, she keeps what she buys and is profitable – she’s an all-round good gal!

 

Sensitive Susan

Susan expects high standards, if your standards are not as she expects, she will treat it as a personal insult and get angry and upset.  She has little patience and will jump on a review site to tell the world what you have done wrong in a heart-beat.  She will then send your CEO a long letter of complaint chronicling all your mistakes.  Before your fatal error, she was loyal and valuable, but you are now in her little black book, her arms are folded and she is in a huff.  Susan loves high-touch customer service and can be brought back to the fold with a sincere apology and virtual hug.

 

Loss making Lucy

Lucy is a retail nightmare and should keep every retailer awake at night.  Her bedroom is her dressing room and she will think nothing of maxing her credit card out to try out the latest trends just to send everything back.  She has no retail conscience and will hold on to stock and make it unavailable for Buy & Keep Katie.  She exploits free delivery and returns policies and makes sure everything is refunded before any credit card payment is due.  Lucy can also be dishonest, sometimes Lucy will even wear and return or even commit fraud.  Strangely, marketers love Lucy, they send her incentives and promotions and encourage her to buy (and obviously send back) all of your lovely stock.

 

Exploring Emma

Emma is comfortable with online shopping and open to new ideas.  Whilst she has her favourite buys, she likes exploring into new categories and brands.  Whilst exploring she may buy a couple of sizes until she knows what fits, but will generally keep one and keep exploring.  She loves new season launches and promotions.  Regular communications which provide information as well as recommendations are key to this segment.  Offering low risk products in new categories is a sure way of generating retained sales growth and a happy Emma.

 

So now you get the idea, all women (and some guys) really are not equal in the online shopping stakes – a sizeable chunk of your customers are Loss Making Lucy’s who are poisonous to your profitability.  

 

So this is where the next generation of personalisation comes into play.  Clear Returns big data solutions can identify and predict (with 96% accuracy) what your shoppers want and match your customer to products that they will keep.  This increases sales and decreases your returns rate – a double profit hit.

And yes, we can even rescue Sensitive Susan for you to make sure you don’t lose one of your most loyal and profitable customers.  

 

Get in touch to talk more.

Viv Sutherland, Sales Director

 

Viv Sutherland
Director of Sales
Tel:   +44 (0) 141 554 4175
Email: viv@clearreturns.com

How Retailers Have Been Incorrectly Using Predictive Analytics

For my inaugural blog post here at Clear Returns, I was recommended to write an article around the topic of “The Power of Predicting: We are Transforming Retail by Predicting the Future”. My initial thought was well, to be honest, that seems like a mouthful and once all sorted out…a bit unoriginal. Everyone and anyone who is using any sort of analytics in retail will likely be making the same claim. But fine, in the grand scheme of things, predicting the future is hardly boring, so I resolved myself to discussing our unique value proposition in using predictive analytics and how that might “transform retail”.

Obviously, the best way to go about proving how we’re affecting transformation is to take some time to understand what the current retail landscape actually looks like. So, before sitting down to write this post, I did a little digging to understand what the perception is within the industry. What I found made me change the topic of the article.

The industry is obsessed with Customer Centricity. And, ironically, not with a 360 degree view of which many tout they’re able to do for their own customers. Instead, they’re obsessed with the most obvious and shallow dimension.

Customer centricity has been a prevailing theme for quite some time and focus on the customer is absolutely right. However, what is surprising is the sheer consistency of what aspect of the customer is being focused on. For example, below are some of the most common statements:

“Shoppers are dictating the future of retail” – Ray Hartjen, Director, Content Marketing and Public Relations at RetailNext
“The future of retail lies in technology enabled-customer centricity” – Paula Rosenblum, Managing Partner and co-founder of Retail Systems Research
“The future will belong to retailers that empower consumers” – Rick Moss, President, Founder, RetailWire
“The future of retail will need to…[be] focused on helping the shopper achieve his or her personalized trip goals” – Anne Howe, Growth & Insights Consultant

Not only have retailers accepted that consumers have more power, they believe that that they need to be given even more.

Again, finding ways to increase customer sales by making the purchase process easy, quick, and enjoyable is inherently correct. After all, there has been a significant change in customer mentality and expectations. Consumers are empowered with information (in-store physical presence, online reviews, social media, etc) and choice, but this means they have retailers under their collective thumbs. Because of this shift, retailers have already responded by using more and more advanced analytics to understand their shoppers and offer them more personalized experiences and offers tailored to their individual lifestyles and preferences. That movement is still in the developing stages, and yet we can see that this is where retailers believe the answer lies. Based on these reactions, a fairly solid argument can be made that it’s the customers who have actually (albeit indirectly) been the catalyst for retail transformation.

However, the underlying issue is that increasing customer spend seems to be all that the experts are focusing on and are thus displaying a myopic disregard for the already visible consequences of this approach. Retailers have emphasized the importance of improving customer sales, customer retention, and loyalty and have done whatever it takes including but not limited to restructuring their entire organizations, investing heavily in analytics to improve shopping experiences, and implementing customer-favouring policies (yes, I do mean returns policies) in order to keep the customer happy and willing to buy.

This kind of behaviour has already perpetuated a harmful cyclical relationship between consumers and retailers that almost no one, aside from a handful of academic researchers, have commented on much less taken into any consideration within their marketing strategy.

Without a doubt, customers have more power. They are free to take their business elsewhere. Desperate to keep them, retailers gave them whatever they wanted, and turned to data to do so more efficiently and effectively, which in turn gave consumers even more power. Now, consumers not only changed their purchasing behaviour but also their whole mindset. They don’t owe retailers anything. As part of the competitive market offering, retailers have facilitated an environment where consumers are encouraged and even desensitized to the prospect of making returns. Even worse, they haven’t even recognized it and instead of using predictive analytics to truly understand a customer’s preferences combined with their true value, they’ve used analytics to just get customers to buy more. Retailers have essentially used predictive analytics to accurately target the exact people who are the most willing to buy without considering if these are the types of people that they want to be buying from them.

That’s where Clear Returns comes in. Our efforts aren’t focused on just increasing purchases, but on aiming our predictive capabilities to increase true value aka keeps. Our capabilities aren’t just about increasing spend, but about increasing spend with the right customers which trickles down into keeps. It’s in this way that we can transform retail, not through cutting-edge predictive models (although we have that too), but by critically examining the problems facing retailers and finding solutions to fix the present cycle so that true market transformation can be possible that will benefit both customer and retailer.

While consumers may still dictate the future, retailers need to recognize that they do still hold some power, the same as of the consumer, the power of choice. Retailers can choose how they want to communicate, what type of relationship they want to have, who to spend their marketing dollars on, and even to some extent who to sell to. At least if retailers recognize this and take the right steps, they’ll place more transformative power into the hands of the right customers, not the ones who would take unfair advantage of the inherent social agreement and trust between retailer and customer.

 

Regina Berengolts
Lead Data Scientist
Tel:   +44 (0) 141 554 4175
Email: regina@clearreturns.com

Why everything you assume about your shopper is wrong..

 

Sales are great aren’t they?  For every marketeer, pretty much without exception, looking at response rates, average baskets, and sales from your campaign is like a shot in the arm.  Triumph.  We look at our response uplifts, congratulate ourselves on our customer selections, creative execution and content and move to using what worked, to make the next campaign even better..

 

But..  what if, 60% of all the dresses we sold through our campaign get returned?  What if the customers I think are my best customers are actually serial returners who are costing my business a fortune? Well, let’s not think about that because the sales were great weren’t they.  Reverse logistics nightmares, handling costs, out of stock issues, that is surely someone else’s problem, isn’t it?

 

The reality is, it’s time for a seismic paradigm shift in the way we think about the sales and our customer.  With the increasing growth of online fashion sales, and as customers become more and more comfortable with the concept of their home being their changing room, retailers have to grasp a basic concept – a sale is not a sale until the customer decides to keep it.

 

The simple reality is, using our big data algorithms to match customers with a product they will actually keep is game changing in its simplicity.  Optimizing what a customer ‘keeps’ rather than ‘sales’ is the only viable way forward.   The benefits are endless for every business unit – sales growth, retained revenue, operation cost savings, improved personalisation and stock availability improvements, not to mention the fact that by marketing products to customers they will want to keep is putting them at the heart of what you do.

 

We are the only company globally that can lead this change.  We understand who are keepers, who are high risk to your business from a return, who should be encouraged to return and explore and what product or category your customer should be marketed with to make sure what they buy they actually keep.  Feeding customers who are costing your business money with endless marketing campaigns, promotions and incentives has to become a thing of the past and with new big data technology, it can be.

 

Adding revenue to the bottom line has actually never been easier, retailers simply need to take the blue pill and delve into the new world of customer returns behaviour.

 

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Viv Sutherland
Director of Sales
Tel:   +44 (0) 141 554 4175
Email: viv@clearreturns.com