The online fashion 'boomerang effect
E-commerce expert Heikki Haldre explores why more clothes sold online become victim to returns compared to instore sales
With around 25% of apparel purchases made online returned, Heikki Haldre, co-founder and chief executive of virtual fitting room provider Fits.me explores how clothing retailers can reduce this challenge to profits.
"The bricks-and-mortar sales model for clothing is simple: customers try first and then they buy," said Haldre. "Online, the process is fundamentally the complete opposite: customers must buy first, and only when the garment lands on their doorstep can they try it on."
But, although shoppers must take this leap of faith when buying online, online sales continue to increase apace. "Inevitably, however, many of these online shoppers find that when their item arrives, it isn’t exactly what they wanted," Haldre conceded. "Most likely, they will then return that item. Returns impact somewhere between 15% and 40% of apparel e-commerce sales (depending on factors such as the type of item and the return policy of the retailer involved), and are accepted as averaging around 25%."
Counting the cost of returns
The cost of these returns is significant. Retailers bear the fixed fees of the reverse logistics – of warehousing, restocking, and shipping fees (if free returns are offered). "More importantly," Haldre added, "the retailer also has to absorb the diminished value of returned items: the seasonality of fashion means that a garment originally sold at full price will almost inevitably have to be sold at a discount if it is returned mid-season or later. Taking all these things into account, for a retailer, reducing returns by 1% increases the net profits almost by 1%."
The reasons for consumers returning items of clothing bought online vary. "The feel of the fabric is the main reason for returning items for 25% of people, while it’s the style of a garment for 15% of shoppers, he reported. "However, by far the most popular reason for returning items is that the size did not fit, amounting to 43% of returns.
"Even the reason for these fit-related returns differs between shoppers; other Fits.me research found that two in five consumers (41%) buy multiple sizes of the same garment when shopping online simply to check the fit, and then send the ‘wrong sizes’ back – with women more likely to do this than men."
So how can retailers reduce these returns? When shoppers are buying clothes, they take into consideration appearance, quality, colours, texture and size. "Online retailers need to consider the technologies available to them that can be used to emulate the instore customer experience of ‘try before you buy’ for as many of the above variables as possible," Haldre advised.
Technology to combat problem
"There are now some well-established technologies available, from virtual fitting rooms to mobile apps, that essentially offer customers a 'personal stylist' on their device. By implementing these, retailers have the tools available to guide customers into making more accurate purchasing decisions. With poor or unexpected fit the most common reason for clothing returns, retailers have significant cause to solve the online fit problem.
Haldre cited an example. After implementing Fits.me’s Virtual Fitting Room, Hawes & Curtis reported that garment return rates fell by 35%. Thomas Pink also reported that 13% of its online customers said they would have bought the wrong size if they hadn’t used the Virtual Fitting Room, which would in all probability have led to returned garments.
"Virtual fitting room technologies are now a well-established retail solution," he continued. "As early as 2010 some retailers were running trials of virtual fitting rooms and, since then, a significant amount of data has emerged to prove that these solutions do indeed reduce returns from online shoppers. As virtual fitting has proven its worth, the sector has – unsurprisingly – developed and diversified to produce many ‘fit’ technologies.
"Every e-commerce director must consider which problem they are aiming to solve before they decide which solution to invest in. Some fitting solutions focus on telling a shopper the size of garment they should choose, while others provide fit information and leave judgement to the shopper based on their preference for a loose or tight fit. There are also dressing rooms that focus more on style - for example, showing how different garments will look paired together - and do not really deal with fit at all."
As retailers expand their online and mobile channels over the coming months and years, they will need to keep in mind – and do something to address – return rates to keep them to an absolute minimum. Haldre warned: "It is a mathematical certainty, otherwise, that as more and more inventory is sold online, retailers will be forced to accept a higher and higher proportion of expensive returns. Until the issue is addressed, online return rates will continue to eat into profit margins."