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Garment returns and apparel ecommerce: avoidable causes, the impact on business and the simple solution
buyinG fashion online and offline is essentially different
The bricks-and-mortar sales model is simple:
customers try first, then they buy. Online, the
process is fundamentally the complete opposite:
customers must buy first, and only when the
garment lands on their doorstep can they
eventually try.
The impact of this straightforward reversal of
these two steps in the sales process is quite
profound.
In the first instance, there is a startling impact
on people’s propensity to buy clothing online.
In fact it’s a powerful disincentive for shoppers,
the effect of which is evident in market data.
By proportion, about five times less clothing is
sold online: 12-14% compared to about 60%
for computers and over 50% for books. Why?
A study by GSI Commerce reported 69% of
respondents as saying that being unable to try
on clothes before buying deters them from
making fashion purchases online. A similar
survey conducted by Fits.me produced compa-
rable results – see the chart below.
In the second instance, having convinced
customers to buy clothes online it’s also difficult
to convince them to keep those clothes: up to
1-in-4 garments bought online are returned.
Why? That’s what we’re going to look at it in
the remainder of this paper.
whitepaper
reasons why customers hesitate when buying clothes online
Source: Fits.me Internet Shoppers Survey,
February 20126%6%
?TOO DIFFICULT TO SHOPON A MOBILE DEVICE
SLOW SHIPPING TIMES
10% DIFFICULTY OFRETURN PROCESS
30% UNABLE TO TRYBEFORE BUYING
32% UNSURE WHATSIZE FITS BEST
16% SHIPPING FEESTOO HIGH
LACK OF A FITTING ROOM
In bricks-and-mortar stores, around 80% of all
clothing purchases pass through a physical
fitting room. The customer is able to see for
themselves the fit of the item, and assess that
fit against their own personal fit criteria.
This is a pretty vital point: “their own person-
al fit criteria”. Why? Because ‘fit’ is not simply
about numbers or measurements. In reality it’s
highly personal and subjective. Some people
prefer to wear their blouse ‘fitted’, others
prefer a looser, generous fit. Some may prefer
do choose a shirt size that gives them a more
‘fitted’ look despite knowing that they won’t
be able to button the collar, because they know
they’re never going to wear it with a tie.
A traditional size chart does not work this way.
Fundamentally, a size chart recommends one
‘optimal’ size and takes no account of person-
al preferences.
But online… well, the process is essentially
different. Or perhaps ‘deficient’ is a better
description word. This is because there can be
no physical fitting room online – it’s impossible.
A study commissioned by Fits.me in the US
confirms that this lack of fitting room that is
one of the major challenges in online apparel
retail.
Where a retailer has no virtual fitting room, the
shopper is required to make a best guess at the
size that will give them the fit they require. The
first thing to note is that many buyers hesitate
at this point, and this is why conversion rates
remain so low for online clothing retailers.
But the lack of a fitting room online – an es-
sential part of a clothing store – is not only the
reason why people hesitate when buying clothes
online, it is also the reason for high return rates.
Inevitably, of those that do click ‘Buy’, many
of them find – on receipt of the item – that
their best guess was incorrect. Returns impact
somewhere between 15% and 50% of apparel
ecommerce sales (depending on factors such
as the type of item and the return policy of the
retailer involved), and are accepted as averag-
ing around 25%. About 70% of garment returns
are because the clothes didn’t fit as the cus-
tomer expected (or hoped).
Those are frightening numbers for an ecom-
merce manager or director to be staring at, are
they not?
causes of returns
1. Research commissioned by Fits.me and conducted with US online apparel buyers. While lack of m-commerce is considered of lower importance (being similar to current share of mobile use while shopping online), it’s growing fast.
2. GSI Commerce, Oct 2010 for MarketingWeek
The rate of garment returns for online apparel
retail sales is five times higher than it is for
bricks-and-mortar clothing sales .
Now, while returns are not a precise measure
of customer disappointment, it’s not rocket
science to see that there is likely to be a decent
degree of correlation: when a customer realiz-
es that the clothes that have just been delivered
are going to have to go back, it’s going to be
disappointing (unless the purchase was specu-
lative anyway, or the shopper had since suffered
buyer remorse and is grateful for an excuse to
send back the items.)
Further forms of disappointment may follow if
the buyer needs to repackage the items, take
them to a post office, and perhaps pay postage.
And who really wants to ‘waste’ time returning
stuff? Shoppers don’t buy the ‘right to return’,
they want to buy clothes that fit.
It follows that any reduction in returns must
decrease the incidence of customer disappoint-
ment and therefore improve the overall or
average level of customer happiness and sat-
isfaction. And happy customers are vital to
repeat business, boosting sales, lowering costs
and giving a leg-up to your profits.
A GSI Commerce report found that 79% of
customers would be reluctant to buy from an
online retailer again if they ordered the wrong
size of garment. Taking steps to reduce the
reasons for returns, turns more first time cus-
tomers into repeat customers, and makes
marketing spending more effective.
it’s not what you sell, it’s what you sell and people keep.
Jcpenney doesn’t consider a customer to be a customer until she comes to buy the second time. for online retailers it’s fairly easy to measure how many customers have only purchased once, but have never returned to make their second pur-chase.
returns and customer satisfaction: the biG picture
3. Average garment returns bought online are 25%, or 1-in-4. Rates actually vary from 15% up to 40%, depending on the garment type and returns policy of the retailer in question.
The cost of returns is staggering. Retailers bear
the fixed fees of the reverse logistics – of
warehousing, restocking, and shipping fees (if
free returns are offered). More importantly, the
retailer also has to bear the spillage and the
diminished value of the item – the seasonality
of fashion means that a garment sold at full
price will almost always be sold at discount if
it is returned.
Interestingly, we find that while all retailers
measure the fixed costs of returns, there are
only a few that measure the lost value of the
returned items – although the latter remains
the biggest part of the associated costs. For a
retailer, reducing returns by 1% increases the
net profits almost by 1% (to check this for
yourself, ask for a simple calculator from info@
fits.me).
The environmental cost of returns is equally
staggering. A retailer that has a garment returns
rate of 25%, will make 62% more shipments
than the number of items that are sold and
remain sold. This is not good for the planet,
certainly, but of more immediate concern to
most e-commerce directors will be the budget
that is being spent on unnecessary shipping
charges.
the cost of returns
62% of all deliveries are wasteful, helping neither the environment nor your budgets
Total number of purchases: 100 Transactions - 25 Returns + 7 Exchanges = 82 net purchases kept by the the customers
Total number of deliveries: 100 Transactions + 25 Returns + 7 Exchanges = 132 (62% more than net purchases)
Share of “Wasted deliveries” and wasted money = whatever it’s worth to your reputation and bottom line
In apparel ecommerce, 25% of purchases, on average, are being returned
On average, 27% of returns are exchanged for another item
RESULT: The retailer has to pay
for 62% more deliveries than
the actual number of purchases
kept by the customers. For 82
purchases kept by the consumers,
retailer makes 132 deliveries.
100x TRANSACTIONS
25x RETURNS
7x EXCHANGES
Store
Store
the list of ‘costs’ is starting to look extensive. direct costs:
+ reverse logistics, including warehousing and return shipping (if offered)
+ ‘spillage’ (un-resale-able garments)
+ diminished value of the garments to be sold at discount
and the indirect costs:
+ lost customers – the lost customer lifetime value
+ environmental impact of wasted shipments
+ diminished brand value in the eyes of people who attempted to be customers
+ diminished brand perception from having to display the garments at clearance outlets
+ wasted marketing resources which delivered higher gross sales but lower net sales.
4. Survey by The Herald Sun, Australia, September 2011
5. The Australian, April 2011
For customers, there is always a cost associat-
ed with returns – even when the retailer offers
free return shipping. Customers must bear the
personal cost of finding time to return the item.
Many customers will fail to return the unwant-
ed item, perhaps through forgetfulness or be-
cause the miss the retailer’s deadline for re-
turning unwanted items.
For a brand, this is a ‘dangerous’ group: these
are customers who receive a daily reminder of
their dissatisfaction with Brand X when they
open their wardrobe and see the unwanted
Brand X item hanging there.
a survey in australia found that 61% of customers who had made a clothing purchase online had been to a store to try on the item beforehand4.in response, some australian stores have started charging a “fitting fee” for customers who want to try, but don’t buy5.
online shops charge another version of a “fitting fee”: customers bear a personal cost of returning a garment that didn’t fit, in the form of either return shipping fees, or personal time spent returning the item. With cus-tomers well aware of high probability that they will need to return an item, it further hinders online buying.
reasons for returns
Let’s look in more detail at why people return
garments. At the root of most reasons is ‘lack
of product information’.
A lack of product information remains the main
reason why customers need to return clothes
bought online: the Drapers Etail Report 2012
found the main reason to return the clothes
were the fit, the look, or the quality – all es-
sential attributes of ‘product information’.
Drapers found that fit was by far the main
reason for returning a garment bought online,
cited by more than 70% customers. A further
25% admitted to ordering multiple sizes and
returning those that did not fit.
This uncomfortable reality is sharply at odds
with what is, arguably, one of the primary
benefits of online retailing over bricks-and-
mortar stores: the ability to show the garments
at their best using beautiful photography. While
this helps sell the dream, the fit and the feel
of the garment is often barely communicated
at all. Yet ‘fit’ is essential product information!
There are some interesting anomalies in the
results. For example, the reason of “the gar-
ments did not fit” becomes less important for
customers in higher income brackets (52%
instead of 70% average for everyone). Howev-
er, this is not because they know what size fits
them better; instead another reason “I buy more
than one size to try at home” became more
prevalent (32% instead of 25% for everyone).
Apparently, this customer group can afford to
pay for the luxury of replacing the lack of fitting
room online with the fitting room at their own
home.
The reasons why customers say that the garment
did not “look” as expected can be subdivided
by customers saying how the color looked
different from what they saw on their screens,
or how the garment did not mix-and-match
with their existing wardrobe as expected.
However, the “fit” remains the biggest reason.
Levels of fraud – returning garments after
wearing them – remain at less than 2%.
what are the main reasons you return fashion items bought online?
The Drapers Etail Report 2012
I CHANGED MY MIND ABOUTWHAT I CAN AFFORD/NOT APPLICABLE -
HAVE NOT RETURNED ITEMS
OTHER
THE ORDER IS WRONG
I BUY MORE THAN ONE SIZE TO TRY ON AT HOME
THEY DON’T LOOK THE SAME AS IN THE PICTURES/VIDEO ONLINE
THEY ARE NOT AS GOOD QUALITY AS EXPECTED
THEY DON’T FIT
4.32%
6.57%
14.63%
25.33%
30.46%
32.21%
70.42%
returns reactions: What do customers do next?
It is no secret that an online retailer has to
make a sale twice – once when the customer
orders the item, and again when the customer
opens the package.
Fashion is an emotional purchase, and emotions
tend to grow stronger with levels of anticipation.
In other words, we get more excited the clos-
er we get to delivery time. The downside is
that, when a garment arrives and it does not
fit, we have further to fall. The inevitable
disappointment inevitably hurts the brand.
To measure the damage, Fits.me commissioned
a study to find out more about the post-pur-
chase behavior of those customers who got a
garment that they did not like.
About a quarter of customers said they will buy
more from the same brand – a practical attitude,
since they have trialed the brand and will now
know better which size will fit them. However,
52% of customers say that they will buy less
from this online store – perhaps indicating that
they were willing to take the risk once, but not
again.
6. A GSI Commerce report from 2010 found a very similar result: 79% of customers would be reluctant to buy from an online retailer again if they ordered the wrong-sized garment.
25%WILL BUY MORE
WRONG FIT THE FIRST TIME, MEANS THEY’LL KNOW THE RIGHT FIT NEXT TIMEWEB
store
store
23%WILL BUY LESSFROM ANY STORE
THE MOST DETRIMENTAL CLIENT SEGMENT - THESE CUSTOMERS ARE LESS LIKELY TO SHOP THE BRAND AT ALL
WEBstore
store
52%WILL BUY LESS FROMTHE ONLINE STORE
WEBstore
unsatisfied ecommerce customers & brand value
What will they do next?
Internet Shopers Survey , commissioned by Fits.me - February 2012
which channel best builds brand value?
Online stores add tremendous value for your customers , but every purchase is still a
risk without the ability to try before you buy - creating 6x more unhappy customers
than do traditional stores.
And the remaining 23%? It’s the most interest-
ing group, but it’s not great news for retailers:
this group will buy less from any source asso-
ciated with this brand – including their tradi-
tional stores. For this group, the right to purchase
the garment that they expected to receive may
reflect the level of the customer service at the
brand’s stores?
The same study uncovered that, while the
return rate is about 21%, an additional 12%
failed to return an unwanted garment. Not only
are these customers reminded of their unsat-
isfactory purchase whenever they see the item
in their wardrobe, they also bear the highest
cost for their misfortune: the full price of the
purchase. The main reason for failed returns
was missing the deadline; while deadlines are
reasonably long, people tend to be forgetful.
Simple mathematics suggests that, while online
stores offer terrific potential advantages for
both retailers and shoppers, the returns issue
means those same stores today also have the
potential to generate many times more unhap-
py customers than the offline equivalent. Any
brand that operates offline stores with typical
offline return rates of 5% but whose online
equivalent sees return rates between 15% and
40% needs to look carefully at the downsides
of the performance of its online store.
12%UNHAPPY:will fail to return - reminded daily of abad purchase
21% UNSATISFIED:will returngarments
StoreWEB
Store
5% 33%UNSATISFIED CUSTOMERS
UNSATISFIED CUSTOMERS
returns and international sales
Different countries have very different approach
to returns. In the UK and the US markets, return
rates for garments bought online are about
25%. In Germany, the return rates are almost
double this, nearly half of all garments – but
in Japan, almost ten times less than the UK
average, at around 2.5%.
While this applies to retailers doing business in
these markets locally, these differences may
not apply to those selling internationally.
In Germany, with its strong culture of catalogue
shopping, credit cards are rarely used for online
purchases. Instead, local retailers offer alter-
native payment methods or extend their own
credit to customers – and, crucially, customers
pay only when they’ve decided to keep an item.
Without the need to pay upfront all customers
are, to all intents and purposes, in the same
income bracket, and they behave in the same
way that higher income customers do (described
above): many of them order multiple sizes,
ultimately resulting in much higher return rates.
In Japan, by contrast, the return rates are much
lower. While Japanese online retailing has many
differences, including a different approach to
size charts, the main reason appears to be
cultural: the need to return an item incurs loss
of face.
For retailers who want to expand internation-
ally but ship from their own country, these
differences do not apply. Why? Because they
can expect very low return rates – not because
that the customers are happier with the gar-
ments, but because it is much more of a
hassle to return an item. International shipping
charges look expensive, or customs taxes may
be too time-consuming to reclaim.
The perceived difficulty of returning purchases
internationally increases hesitation among
buyers considering a purchase from abroad.
Those who do buy cross-border are those fa-
miliar with the risk, or which are familiar with
the brand from before.
For most retailers, offering free returns across
the globe is prohibitively expensive – although
there are exceptions. For example, Yoox.com
offers free returns from China, and customers
can try on garments while the courier waits
outside their door.
But international purchases can be boosted by
better communicating essential information
about the products: more information about
the fabric, using zoom-able photos… and
better information on the fit.
When it comes to fit, the retailer faces two
challenges. First, internationally the sizing
standards vary wildly: for example, a North
American ‘Medium’ is probably an Italian size
‘XL’. Second, fit preferences vary significantly:
some countries are culturally disposed towards
a more fitted ‘look’, while other regions or
countries may prefer a more generous fit.
7. FiftyONe report: http://www.fiftyone.com/resources/cross-border-returns
What can be done?
free returns
Offering free returns – paying for the return
shipping – is one of the most widely requested
services by the customers. It reduces the
perceived risk of purchase, increasing conversion
rates, but it naturally comes with a high cost.
Both in the US and the UK, about a third of
online retailers offer free shipping on returns.
Some retailers have experimented with longer
return windows – for example, Zappos.com with
a 365-days return policy. For fashion with its
seasons, longer return policies may prove to be
too costly.
In the UK, Amazon.com has teamed with
CollectPlus to make returns as easy as possible.
Customers may leave items for return at any
of 7000 locations – convenience stores, for the
most part - countrywide.
However, making returns easier encourages
customers to use their home as a fitting room.
This is expensive, despite many retailers notic-
ing that customers who return the most also
buy the most.
provide better information
According to ComScore, 63% of customers
check a retailer’s returns policy before clicking
to buy. However, this does not affect the truism
that customers don’t enjoy returning garments
and would prefer to buy clothes that fit, not to
purchase ‘the right to return’.
The alternative – or parallel – strategy must,
therefore, be to provide the information that
the customers need at the moment of purchase,
reducing the likelihood that they need to return.
And with ‘fit’ the over-riding reason that cus-
tomers return garments and returns so expen-
sive, addressing the ‘fit problem’ ought to be
near the top of any e-commerce priorities list.
There are a variety of approaches in the market
enabling e-commerce directors to address the
issues to a greater or lesser extent. Some
solutions focus on showing how different
garments look together (mix-and-match solu-
tions); others use CGI to show an image of a
standard-sized garment superimposed on an
image of a customer. Fits.me has focused
solely on showing how the garments will fit a
customer; the Fits.me virtual fitting room is
the only solution that shows the customers how
the different sizes of garments will fit their
specific size and body shape.
clearly, retailers can adopt two approaches, and in parallel:
+ make returns easier for customers; and
+ reduce the need for returns in the first place, by providing customers with better product
information
8. Econsultancy, “Retailers need to improve their returns processes“, 2011, and Internet Retailer “Free shipping“ 2012
9. ComsCore “Online Shopping Customer Experience Study“ 2012
the fits.me solution
conclusions
Fits.me’s virtual fitting room solutions helps
boost the profitability of online clothing retail-
ers by enabling them to overcome the ‘fit
problem’. First, sophisticated robotic mannequins
are photographed at high speed in thousands
of permutations of body shape, while dressed
in a retailer’s key garments, in each available
size. Then, on the retailer’s site, Fits.me is able
to display for online shoppers the key garment
pictures that correspond to their exact body
size and shape after asking for just a few basic
measurements.
The assurance of fit gives customers the con-
fidence to buy, improving conversion rates (up
to 57%) and decreasing returns (by up to 35%).
Unless the incidence of returns is addressed,
the cost of returns is going to grow dispropor-
tionately. Why? Because, despite the issues
around sizing, online clothing sales are expect-
ed to grow faster than offline clothing sales:
the value of online clothing sales is forecasted
to grow 86% from its 2011 value of £5bn to
reach almost £9.4 billion in 2016.
With overall garment sales near-static (growing
at perhaps 3% per year) this means that a
growing proportion of your ‘sales’ are going to
be subject to an average return rate of 25%,
instead of the in-store average of 5%, with all
the attendant costs. The impact of ‘the wrong
size’ on returns and profitability will become a
more and more significant problem until retail-
ers act to put a stop to it.
Fortunately the solutions are simple, available
and their impact is easy to measure, making it
straightforward to construct a business case for
their deployment. Contact us now – info@fits.
me – and let us help construct yours.
clients fits.me
For further information,contact peter rankin:
Email: [email protected]
Phone: 0845 528 0570
www.fits.me