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The more multichannel grows, the more returns will surely follow

Years ago, I was a van driver’s mate in London. The van driver worked almost exclusively for the antiques trade so our working day was spent picking up objets d’art from auction houses and taking them to antique shops, or vice versa.

Occasionally, we would deliver items to clients’ homes. Usually the piece had been bought outright but sometimes it was being lent out “on approval” to see if it suited the client’s needs. The most memorable of these was when we dropped a pair of elegant occasional tables to the large Holland Park house of Bryan Ferry, one of my style heroes. Alas, the Geordie crooner was not in residence when we dropped off and then, a few days later, collected the tables; they obviously did not fit his bill. I was very impressed that he had a framed photograph of actress Kim Novak on the baby grand piano in his lounge. Very Roxy.

But I digress. I was reminded of the antique dealers’ “on approval” method this week when discussing the vexed question of returns on online sales. Just as in the far-off days of old-fashioned mail order or catalogue shopping, consumers, especially women, order multiple variations of the same or similar pieces, knowing that they will definitely send back some or most of them. Talking to female friends, they describe this as just part of the process of buying online.

As a bloke, this seems an odd way of shopping, but the greater problem is with the online retailer who has to manage the practical difficulty of managing inventory that is circulating around the country, if not the world. Depending on merchandise category, returns can be as high as 40%, although about 25% seems the UK industry average. If that sounds challenging, in Germany it is a frightening 50%.

As we reported in last week’s feature on selling to China, there the locals’ preference for swapping information on social media and a high level of detail on the website helps bring the rate of returns for fashion items down to 8%-10% in the world’s most populous country.

Handling returns is testing retailers’ minds more than ever before. This week, at a Drapers briefing breakfast sponsored by retail logistics specialist
Clipper and new click-and-connect operator Doddle, a varied panel swapped experiences and ideas about this question. What came though clearly is that online operators are working hard to find ways to reduce returns in the first place. These may include “virtual fitting room” technology as provided by Virtusize, Fits.Me and Metail or it might be just giving precise measurements (so that customers can measure favourite pieces at home to compare the likely fit).

Another medium that is now the norm for market leaders like Net-A-Porter is the use of video to show the garments in motion, being worn. This week London-based video content producer Rockabox, which created the recent video-based campaign for Monsoon Accessorize, held an evening reception aimed solely at potential fashion customers. At our briefing breakfast, one of the attendees from a supermarket that does not use video on their site admitted they were now seen as being behind the curve.

What has come through loud and clear in my discussions is that, yet again, the customer is king or queen here. They are not bothered by the problems returns cause for the (r)etailer; they just want to send the thing back, for free, and get their money back immediately. Retailers that do not treat returns as seriously as sales will suffer.

Readers' comments (1)

  • I totally agree with the last paragraph. Returns may average at 25%, but over or around 50% is not uncommon in the UK either.

    Next or same day delivery will only be more expensive for retailers and I am unconvinced customers need such immediate delivery. I can see it leading to higher levels of returns AND customers expecting a discount if they request delivery after 3 days (for example).

    I guess the competition is great for the customer. However margins are being squeezed at both ends, with reduced RSPs owing to intense competition and supply; then increased logistics costs (delivery and returns). Though I fear the customer will 'pay for it' in the long run. It certainly reduces the amount of money retailers can re-invest in their business.

    Our consumer research says virtualisation is not the answer, although I do believe it can provide incremental benefit in a similar way that a decent predictive algorithm can.

    I represent 'No Place Like Holm', a new startup. We have created software that can reduce returns to 10-15%, potentially lower with all our 'bells and whistles'. It also drives sales growth at an individual customer level and generates insight to quickly help retailers deselect poor performing product.

    We have just started approaching retailers in the last few months. We are looking for only a handful of retail partners.

    We look forward to evidencing our capability in 2015.

    In the meantime we can expect to see more stressed van drivers on our roads, in the run up to Xmas!

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