It won’t have escaped anyone’s attention that home shopping is growing fast…very fast, and most of you will know that few companies are making very much money out of it and those that are do so with very thin margins. What might surprise you is that a large percentage of the goods sent to homes are returned to the warehouses or stores by customers – as much as 40% for some companies. In fact it is quite bizarre that many retailers now look upon the returns process as their biggest single supplier and accept it as an inevitability.
The cost of returns is high. Not only is the value of the stock tied up whilst it is being processed, many items may not be suitable for return to stock and only realise a fraction of their true value. There is also the cost of shipping out and back that has to be shouldered, not to mention the cost of picking the item in the first place and of processing the return. The possible damage to the reputation of the company if the customer remains dissatisfied is an important factor to consider and all in all it’s a pretty sorry and often expensive story.
Returns clearly represent a significant cost and is a contributing factor to the thin or negative margin problem – so why does it happen and what can be done to minimise them?
- Minimising Returns
We have all heard of what happened back in the days of catalogue shopping when customers would order a clothing item in three sizes, try them on and then return the two that don’t fit – invariably the smaller ones! When similarly high levels of returns were experienced with on-line shopping it was regarded as a fact of life and not questioned.
As an illustration of how big the problem is becoming some third party logistics providers are targeting the processing of returns as a major business opportunity.
Customers do not return goods for sheer entertainment value. For most it’s a chore and keeps their money tied up until the returned goods have been received and processed. The vast majority of these goods are returned either because they are not as expected, are faulty or the customer has not understood how to operate them. These are all preventable problems. The most common is the goods not being as expected and is perhaps most noticeable in the fashion sector. People still order clothing items in multiple sizes because they are not confident about the manufacturer’s sizing – and with good reason as these can vary enormously between brands. Some retailers are even inconsistent between their own ranges, leaving customers uncertain what size to order on-line when not in store and able to try on.
So what positive steps can be taken? A few retailers have already done something about this by at least getting consistency within their own ranges and have found lower levels of returns as customers become confident that a particular size from one range that fits will also fit from another. Others have tried virtual mannequins and other photographic techniques to give the customer an idea of what the item would look like when worn and done well these can help. But the real answer may lie in the brave new world of omni-channel.
- Could Omni-channel be the solution?
One of the precepts of omni-channel is that the customer is in control and in the case of clothing has ownership of garment sizing. At the moment the retailer owns the garment sizing process and leaves it to the customer to decide what size to buy. In an omni-channel world the customer owns his or her sizing data and it is up to the retailer to decide which garment will fit them best. It may sound like a subtle difference and some are already making some progress toward this goal by being more open about what their size ranges relate to in human terms, but omni-channel takes it much further.
And other sectors are not immune to these techniques. One on-line electrical appliance retailer has gone to great trouble producing videos showing their appliances in a typical home setting and others have videos showing how to operate the appliances.
It ought to go without saying that on-line descriptions must be accurate and complete and yet too often they are not, in many cases either relying too optimistically on the manufacturer’s overzealous text or in others far too brief to be of use.
High levels of returns are not inevitable. Everyone should be used as an opportunity to prevent that type of return happening again. Of course this is not helped by the fact that customers often don’t tell you why they returned something or if they do it is not always the true reason. A return should be seen as a process defect and just as manufacturing in the ‘80’s introduced the concept of zero defects – a target that can never be fully attained but one to which we should all aspire – so zero returns should be the new mantra of on-line shopping.