Commentary

$107 Billion Lost In Returns

According to a recent study and report from Rakuten Co., the holiday shopping season is often a peak for retailers’ sales. But the flipside to that boom is it leads to peak returns season, costing a total of $107 billion lost in returns a year. 

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In 2015, shoppers in the US returned 30% of all apparel and footwear items purchased online, with a small number of logistic firms handling the majority of these returns. While a recent survey suggests that a positive returns experience can attract new customers, the process is a waste of resources, says the report, which reduces retailers’ bottom line, incurs significant environmental costs and undermines the hard earned goodwill and trust of customer

To ensure future success, says the report, fashion retailers must try to solve one of the most vexing issues for online shoppers: finding items that fit properly. The report quotes a whitepaper showing how the modern consumer can find out how to reduce the rate of online returns by up to 40% this holiday season.

This report draws on qualitative research conducted by Fits Me in 2016; as more shoppers increase how frequently they shop online, they also develop distinct behaviors as they would in a physical retail space. Understanding what these are can provide retailers with valuable information that will help them keep shoppers happier.

Online apparel, footwear and accessories expenditures are forecast to grow by 39% over the next 4 years to reach $96.41 in 2020. Fits Me expects that getting fit right will become more important than ever, making this paper essential reading for anyone with a stake in the fashion industry.

Retail fashion is the fastest growing e-commerce sector in a digital world where half of all purchases are now made online. As the most popular e-commerce category, the U.S. has witnessed an 11% increase in online sales of apparel and accessories in the past year alone. Yet serious obstacles threaten further growth; one of these being the ongoing issue within sizing. The legacy of traditional sizing has led to an ever increasing $62.4 billion mountain of returned apparel and footwear purchased online.

Shopping for clothes can be a gamble. Sizes vary widely across brands, making the customer waste time and effort searching for fit rather than being able to choose purely on style. Additionally, almost half of online consumers feel annoyed by the amount of clothes they have to filter out before finding what they want.

The problem originates with the antiquated system of ‘size’. Developed in the 1940s when 4% the American National Institute of Standards and Technology used US Airforce women to produce a series of universal measurements,

And its rigid definitions have been problematic from inception.

These measurements, based on a primarily young, healthy demographic, were eventually abandoned by the US Department of Commerce in 1983. As brands evolved they were replaced by more flexible measurements, designed to suit the needs of different demographics in a more fragmented market. Still the concept of ‘size’ remains. S, M, L, continue to hold iconic meaning for the customer as a way to determine fit and provide symbolic reassurance (or not). With 88% of respondents in a recent Fits Me survey frustrated by sizing inconsistency.

For women, clarity and support is key. Fit is a complex, multi-dimensional issue for this group, with body size likely to change with age or after childbirth. This evolution can create anxiety and confusion as women move from one life cycle to the next. Brands that lessen the confusion around size, and support women during the online shopping experience will inevitably win their loyalty.

Women, young and old, are comfortable with digital commerce. Older women especially enjoy the privacy afforded to them by digital commerce, seeing it as an opportunity to ‘shop in peace’. It is only when confronted by ‘the number game’ when a consumer discovers they are a 6 in one store and a 10 in another.

that the digital shopping experience becomes a frustration.

The industry’s answer has been to offer free returns. While women are generally content with this system, it has created substantial logistic and financial costs for the retailer. There is also a reputational penalty, with 85% of women reporting disappointment when clothes don’t fit. A wrong guess, a returned item, a lost customer, digital retailers ignore at at their peril.

For men, efficiency is king. They apply a more systematic approach to shopping, honing in on what they need, and want a streamlined experience to reduce their time and effort. Counter-intuitively, says the report, this makes men wary of online fashion. The combined risk of a poor fit and time wasted returning an item works against their ‘need for speed’ in any shopping experience. Digital retail also risks sabotaging just-in-time purchases, where men buy clothes they need to wear almost immediately.

Both sexes experience disappointment when shopping digitally for fashion, albeit for different reasons. Women need the digital world to talk to them, not to the numbers. Men need a streamlined offering, taking them to what they need in the shortest possible time.

These unresolved problems for the consumer have created serious issues for the fashion industry, including ever-increasing logistic, reputational and financial costs. Below are some of the burdens placed on the industry because of poor fit.

Fashion retailer ASOS Chief Executive Nick Robertson said a 1% fall in returns would immediately add $16 million to the company’s bottom line. It is clear the problem of fit needs to be solved for both retailers and consumers.

  • Fit-related returns cost fashion retailers millions in lost revenue, shipping and processing costs
  • Returns are damaging to the environment, increasing congestion and CO2 emissions
  • “Current return rates are around 30%, but climb up to 50% for expensive items”
  • Lack of accuracy in fit reduces customer satisfaction and potential lifetime value of the consumer
  • Excessive returns lead to higher inventory, warehousing and delivery costs.

Future success for fashion brands rests upon the successful transition from mass fashion to me fashion. To thrive in the future, more and more companies are taking their first steps to a truly personalized shopping experience, creating value for both retailer and consumer in the digital marketplace.

 

 

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