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

Playing For Keeps – keep stock sold over the peak trading period

 

Keeping stock sold – avoiding returns the key to retail profits

The sales figures over the peak trading periods of Christmas and Black Friday may make the headlines, but those returns coming back over the next 28 days will cost retailers millions…and often get ignored.

It’s time to get the facts.

Playing for keeps…

Clear Returns new Playing For Keeps report offers the facts around returns on Black Friday, peak season and beyond. £160 million of Black Friday stock is set to be returned, stock that will then be unavailable to sell during the most critical trading period of the year…Christmas.

Playing For Keeps is more important than ever as it is not really a sale until the customer decides to keep it. Returns kill retail profits and Clear Returns presents the facts that the wider retail business simply cannot afford to ignore:

 

Clear Returns can help retailers regain an extra £1 million for every £10 million returned, statistics which make Clear Returns one of Europe’s  top tech scale-ups according to The Telegraph.

Expert insight…

Clear Returns CEO, Vicky Brock, explains why Black Friday could end up being a short term gain but long term loss for many retailers:-

“Forget the headline-grabbing figures of what analysts say people are going to spend on Black Friday. That’s just the beginning. The real concern is that the event could end up costing retailers money rather than boosting their profits.”

“This is because the spike in sales from November 27 will be followed, for many businesses, by an increase in returns – and profit is only generated when customers decide to keep their purchases. On average, 14 per cent of all consumer electronic sales are sent back, and in the build-up to Christmas in particular, this can cause all manner of logistical headaches and lost margins.”

Talk to Clear Returns now to help your customers keep more of what they buy – and keep buying.

Returns & why they should be on the retail CSR agenda

It really pains me, and I know it pains many people, to see the sheer amount of packaging and waste that goes into a delivery of a product ordered online.

I realise there’s a trade-off between the amount of packaging in the box and the quality of it on arrival. You don’t want to compromise on the packaging to the extent that the delivery arrives damaged, so it’s safer to over-package.  But of course, that has a huge cost and environmental impact.

These hidden social costs are even extreme when there is a return involved.  E-commerce returns for fashion in the UK average 30%. They can exceed 60% in Germany. You’ve got the customer opening all of this, so the packaging is very rarely in a condition that can be reused or salvaged for a future despatch. Not only that, if there is a return in that package, the shopper is going to be repackaging or bundling it up to go back in a van to go back to a warehouse where it’s got to be opened, cleaned, repackaged and finally made re-available for sale. That may involve it having to be transported to a different warehouse or back to store.

There’s potentially a significant loss of margin in that process. Packaging, road miles, you know, environmental impact, social impact all the way through this process of a return, yet alone the business impact from things like reduced margin, poor customer experience, and impact on profitability.

CSR and returns

It is this aspect of the social, economic impact, environmental impact of a return that both the shopper and the business are failing to give adequate consideration.

I believe a retailer serious about its CSR (Corporate Social Responsibility) will be arguing to the rest of its organisation, arguing to the board, ideally even educating some of the customer base, that returns at their current level are not sustainable. You are not doing anybody a favour –  including the customer when you are incentivising them to return and shop with the intention of returning  – because there are all these hidden costs.

These hidden costs are not necessarily borne by the retailer. They’re not necessarily borne solely by the shopper but they are ultimately borne societally. The cost of a van going two or three times to deliver a parcel because customers are frequently out, the cost of then picking that parcel up from the post office, or from the customer, back to a central warehouse, the cost of all the stuff that’s going on at the central warehouse, the product then being shipped by road to another warehouse where it gets back into the supply chain. The cost of buying more stock than required, simply to keep availability due to the sheer amount of stock out on loan.  And the waste involved in packaging and re-packing the same item time after time.

Potential impact on consumer behaviour

It is common to see returns having  a £30+ cost associated with them and that’s just direct costs of the handling, delivery and packaging, let alone externalities of environmental impact and waste. What I would like to see is organisations like John Lewis, Marks & Spencer’s and IKEA, who’ve been very forward in talking about CSR, environmental impacts and how they’re doing ethical sourcing, to also start talking about ethical returning.

Incentivising people to buy more and more, and return more and more is not, in my view, sustainable or ethical, and I think if the shopper was more aware of how much product goes literally into landfill, the r0ad miles generated, how much packaging goes to waste, how much stock gets cleared off the jobbers for disposal at a fraction of the cost price – they would be concerned and they would probably look at their own returning decisions.

Focussing the CSR agenda to include returns

I work in this industry, I’m obsessed with the data and I’m aware of what’s happening – but very, very few people are. So, it’s really important to me that returns get on the agenda of corporate social responsibility and that this is one of the things that CSR directors and retailers are talking about in the coming years.

Because returns at this level are not sustainable for anybody, not at business level, not on an environmental level and not at a wider society level.

Clear Returns build up to Customer Returns Summit 2015

Clear Returns CEO, Vicky Brock, discusses her attendance at the 2015 Customer Returns Summit in London on the 21st-23rd September.

Building on the success of 2014, The Customer Returns Summit is back for 2015 and is bringing together the most senior reverse logistics experts from leading retailers that include Debenhams, Shop Direct, Tesco, Panasonic, Argos, Sony and more. Clear Returns is pleased to be a sponsor at the event in 2015.

Clear Returns, CEO, Vicky Brock on why this is a significant event in the retail calendar:

“I think it’s incredibly important that there’s a retail industry event focused on what I believe is the biggest challenge for retail right now, particularly distance selling retail like e-commerce and TV shopping.

Returns globally is a £425 billion problem, £221 billion of which have been identified as preventable, which means if the retailers do something about it, if marketing is tackled, if customer processes/delivery is tackled, there is £221 billion worth of additional retained revenue on the table for retail profits.

Clear Returns are the industry leader in returns intelligence. It’s an absolute no-brainer for us to be there. Our absolute specialism and remit is that we help retailers identify, tackle and ultimately, prevent returns, and we do that by looking at the products, the customers, the marketing and the service processes that are driving up return rates, and more importantly, the interplay of those things.

Clear Returns are delighted to be attending the Customer Returns Summit once again and are looking forward to discussing many key aspects of developing customer experience and retail profitability in a multichannel retail context.  We look forward to meeting others in the retail and supply chain who have reducing returns to a manageable level on their corporate agenda.”

Returns kill retail profits. Clear Returns offers a pro-active solution. So, why not get in touch?

Contact Us HERE

OR

Email: info@clearreturns.com
Phone: 01415544175

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Clear Returns featured on Consultancy.uk

Clear Returns are delighted to be featured on Consultancy.uk, the online platform for the consultancy industry.

This piece is dedicated to our work with IBM to improve the retail analytics landscape for numerous retailers around the globe. Since victory at the IBM SmartCamp in Dublin, Clear Returns have gone from strength to strength in helping some of the biggest names in retail save thousands on their return rates.

“The effects of returns can be relatively negative on the business from which the clothes were sourced. According to Clear Returns, in some retail branches 80% of customers that undergo a return experience, do not shop at that retailer again, while 1% of serial returners come to drive 10% of total return costs. The most interesting aspect of the research is that it is a relatively small number of products (7%) that account for a large part (50%) of total returns…”

The full article is available below:-

Clear Returns & IBM partner to improve retail analytics

Stephen Budd of Clear Returns.

Video | Clear Returns on using retail returns data to boost profit

Stephen Budd and Vicky Brock of Clear Returns talk with IBM on retail analytics, big data and how insights into returns data leads to big uplift in retail profits.

IBM is a multinational and consulting corporation from the United States of America, with headquarters in locations such as New York. IBM manufactures and markets computer hardware and software, and offers services in hosting and consultancy.

The video can be found below from our official Clear Returns Youtube channel:

Clear Returns MetaPack Returns Webinar

Retail Returns Insights Webinar Available Now

Are returns a headache for your retail business?

Clear Returns invites you to listen to the solutions explored in our recent webinar with MetaPack, Returns: The New Battleground for Retail.

The webinar was a collaboration between leading industry professionals, Clear Returns’ CEO Vicky Brock and MetaPack‘s Commercial Manager David Staunton,  who discussed solutions around returns strategies and analysis, which has become an increasingly complex issue amid changing customer behaviour and a dynamic retail landscape.

E-commerce sales are experiencing significant growth, so much growth that, for many retailers, distance selling has become difficult to sustain with return rates as they are. Only 16% of retailers have said they’re able to profitably fulfil omnichannel customer demand, while some retailers are seeing their return rates grow faster than sales.

Clear Returns’ data analytics has shown that 1 in 3 fashion items bought online in the UK are returned, and in some geographies, such as Germany, that rate can go up to 60%. But it’s not only fashion retailers that are seeing too many products come back to the store. Clear Returns works directly with clients from electronics, to jewellery – delivering returns intelligence to all non-grocery categories.

Returns are a growing problem for retailers across sectors and channels, especially since the damage done by returns goes beyond the initial refund – up to 80% of first-time customers who return will never shop with that retailer again, resulting in a significant loss of customer lifetime value. During this major shift in retail, it’s essential that distance sellers focus on maximising their returns strategies and customer experience with innovative technology and proactive solutions.

To learn more about these returns trends and issues and how Clear Returns’ and Metapack can help you tackle them, listen to the free webinar.

Get in touch directly at info@clearreturns.com to discuss how we can help your retail business grow its profits by helping your customers keep more of what they buy.

 

Clear Returns Nominated for Retail Week Tech & Ecomm Awards

Clear Returns is proud to announce that our innovative work with leading UK TV shopping channel, The Jewellery Channel (TJC), has been nominated for Customer Insight Project of the Year, part of the Retail Week 2015 Tech & Ecomm Awards. The winners of these premier IT awards will be announced at the Hilton Hotel in Park Lane, London, on June 10th.

The Retail Week Tech & Ecomm Awards are a celebration of the very best of technology and digital ideas that are leading the way through the fast changing retail landscape. With increasingly more applicants each year, retailers are recognising the importance of innovative technology that is dedicated to changing customer experience for the better.

Clear Returns’ award nomination has proven the company’s commercial impact alongside the biggest players in ecommerce and multichannel shopping. Broadcasting to over 30 million homes, The Jewellery Channel is one of the UK’s largest shopping channels. Clear Returns has helped this already innovative retailer gain a competitive edge by focusing on what its customers keep – not simply what they order. Together, we’re ensuring TJC leads the way in customer experience, by helping customers keep even more of what they buy.

Clear Returns’ groundbreaking returns intelligence software has already been named Ecommerce Innovation of the Year 2014 and Top Tech Start Up in Europe. We consolidate and  analyse data from across a retailers’ business and the wider market, in order to provide the highest impact intelligence and proactive alerts on returns. Clear Returns typically delivers £1 million of additionally retained revenue for every £10 million in refunds. Do get in touch directly, or with the Clear Returns team, if you’d like to learn more.