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

IMRG Connect – key highlights of the day

The latest IMRG Connect event was held in London on May 2nd with a great line up of speakers and engaging content and here we summarise the key take-away points of the day.

One particularly interesting keynote presentation was delivered by Sean McKee, Head of Ecommerce and Customer Services at Schuh. Sean discussed Schuh’s approach of focusing on full price sales and limiting promotions as well as their single view of stock across their stores, which allows them to offer customers an attractive reserve and collect offer within 20 minutes.

Schuh have a single view of stock levels across their retail network

CEO of Clear Returns Vicky Brock kicked off the afternoon session with great insight into how you can transform returns to your advantage. By truly understanding your customer behaviour in terms of both sales and returns, this allows retailers to effectively segment and target much more appropriately. For instance not offering discounts and incentivising those who like to wear and return – Vicky pointed out that this group have cost one retailer £660,000 in a 5 month period.

Neil Ashworth, the new CEO of Collect+ also took to the stage in the afternoon to discuss exciting results from their latest survey, which proved the increasingly popularity of a click and collect scheme and the increasing inconvenience of collect in-store felt among customers. This led to some interesting forecasts for the future of retail delivery methods.

“Wear and return cost one retailer £660,000 within 5 months”

Towards the end of the day at IMRG Connect Shiran Liyanage, Head of Marketing at Metapack looked to the future of the industry. Metapack estimate that by 2017 there will be a 63% increase in UK deliveries, although up to 30% of volumes will be for international customers. The impact of cross-border growth was a key theme of the day, and many retailers showed great interest in hearing how they can develop a successful strategy in the international marketplace.

Improving the customer experience for online shoppers

A recent survey from the Boston Consulting Group featured by Internet Retailer magazine explored what factors were necessary to improve the customer experience for online shoppers. Findings generally correlated with those of ComScore’s research comissioned by UPS from last year.

Customers are increasingly focused on the post purchase experience online, such as the delivery and returns processes. Worryingly for retailers 74% of customers stated that free delivery would improve their online experience, a significant rise from UPS’ result of 58% just last year.

53% of customers use whatever delivery method is either cheapest or free

Additional important factors around delivery to the respondents were fast delivery options, guaranteed delivery and flexible timing and location of deliveries.

This also ties in with the expert feedback from the recent Metapack Delivery Conference, as many attendees heard that free, fast and convenient delivery were key to customer satisfaction.

But what does this mean for retailers in practice? Many cannot afford the substantial cost of providing free shipping yet customers clearly demand it and that demand seems to be growing. This is something that retailers will need to take into consideration when planning their online strategy.

35% respondents of the survey also believed that free returns would improve their online experience

Additionally the return and exchange process was an area that customer’s were least satisfied with. According toComScore’s research comissioned by UPS 42% of customers would like retailers to improve the ease of returns and exchanges.

Customers also felt that providing clear return policies online would be a key improvement. This is hugely important for retailers as 63% of customers will look at the return policy prior to purchasing and if this is in any way unclear, many will abandon their basket.

Providing payment themselves for returns shipping and re-stocking also dis-satisfied online shoppers

 

Overall customers demands from the online channel appear to be increasingly price and post-purchase focused. This proves our theory that the sale is truly no longer the end of the transaction and until these issues are addressed by retailers this demand for improvement will continue to grow.

Metapack Delivery Conference Event Summary

Metapack’s Delivery Conference was held at the Business Design Centre in London February 7th.

Clear Returns’ highlights of the day included an insightful introduction from Andrew Starkey, IMRG ’s Head of E-Logistics. Some key statistics came to light from his presentation including:

– 671 million online retail orders were made in 2012
– Click & Collect use may increase to as much as 50% of orders by 2015
Mike Newnham, Chief Customer Officer from the Royal Mail then revealed the results of their survey conducted over the Christmas delivery period. Some interesting insights into customer behaviour during this time surfaced from their findings.

– 15% of online shoppers return Christmas items
– 71% of customers think free delivery would encourage them to shop more

Towards the end of the day we heard from Clare Gilmartin, VP Marketplaces Europe, Ebay. Her insight into changes the e-commerce industry will go through was also a terrific presentation. Her predictions include:

– Mobile connections will surpass PC connections globally
– China will surpass the US in terms of e-commerce growth in the next 3 years

Clare also highlighted that flexible returns play a role in purchasing decisions. She stated that 63% of online shoppers look at return policies prior to purchasing and 50% shop more often with a retailer and are more likely to recommend a friend to that retailer if they have a lenient return policy. This seems like a rather risky message to send.

Nick Gomersall, Innovation and Communications Director at Metapack , delivered another brilliant presentation. His focus on back-end fraud enlightened the audience to the news that this cost is currently not being measured, which can be as much as 1-2% of total turnover.

Retailers throughout the day were being encouraged to offer free, fast, convenient delivery and lenient, flexible return policies to satisfy customer’s demands. They were also told that if customers overbuy they often end up keeping more items than they intended to. Furthermore fraudulent customers who claim their parcel wasn’t delivered tend to get the benefit of the doubt and receive another parcel immediately.

Our research shows that customers often exploit lenient returns policies to overbuy and use their bedroom as a fitting room or engage in ‘wear and return’ behaviour. If free delivery is added into the mix this kind of behaviour will almost certainly be encouraged.

Retailers need to be extremely careful and cautious before they deploy these types of strategies. Even though free delivery and returns may encourage greater sales, the true cost of around 30% of these items being returned, repackaged, reshipped and restocked must be considered.