On average, online purchases in the apparel industry experience a 30% return rate. Considering that, along with recent data from a UPS study, Rethinking online returns, that says the expense of processing returns ranges from 20-65% of the cost of goods sold, it’s easy to see why apparel companies need a robust strategy for returns processing.
It sounds reasonable to say, “Before changing their returns processing, they should change their returns policies” – but policy changes can be tricky in today’s age of savvy, demanding online consumers. Consumers want flexible return policies, and 88% of shoppers review a retailer's return policy during online shopping experiences, with 66% doing so before purchasing, says UPS.
Having the wrong returns policy and process can make or break a fashion retailer. Shoppers are increasingly buying apparel online, and many use a strategy of purchasing several items at once, comparing them at home, keeping one or two, and eventually returning the others. It’s the best way for consumers to maximize choice and convenience, but it’s a balancing act for online apparel retailers: flexible returns processes win the customer, but excessive returns costs could sink the company.
What does such a balancing act look like? Keep reading for examples.
For years, apparel companies wavered between overly generous returns policies and processes and stingy, cumbersome ones. On the generous side, Nordstrom allowed customers to return purchases anytime, anywhere and LL Bean accepted returns decades after purchase and with no proof of purchase. On the stingy side, Forever 21 refused to refund money, only offering exchanges or store credit and allowing online purchases to be returned by mail only.
Thanks to advances in technology, the two extremes are moving to a middle ground, optimizing returns processes to strike a balance between gaining customer loyalty and protecting profitability.
For example, Nordstrom still offers their anytime, anywhere returns processing, which they’ve made even easier by allowing returns between Nordstrom and Nordstrom Rack, including online-to-store. But now, thanks to modern ERP, Nordstrom can offer this policy with a profit-protecting spin: the company tracks each consumer’s purchase/return history and makes case-by-case refund decisions, allowing them to offer a generous returns process while weeding out those who would abuse that generosity.
According to an LL Bean spokesperson, "A small but growing number of customers has been interpreting our guarantee well beyond its original intent. Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years. Others seek refunds for products purchased through third parties, such as at yard sales.” LL Bean ended its lifetime guarantee, reducing it to a still-generous one-year, and requires a proof of purchase for returns or exchanges. Like Nordstrom, LL Bean now uses technology to track consumer purchase/returns data in a calculated move to weed out “bad customers.”
Forever 21 has also moved toward a more middle-ground returns policy and process, updating their previously stingy refusal to issue refunds or accept returns in stores; by keeping all store data connected, new technology makes it easy for the company to accept returns by mail or in stores. Customers may also receive a full refund to their original form of payment.
Will Forever 21 suffer financially from offering refunds and a more consumer-friendly returns process? Doubtful. If they follow the “click & collect” processes so wildly successful at Kohl’s, they’ll do fine. Kohl’s has turned their ‘buy online, return in store’ process into a competitive advantage and revenue booster by enticing consumers who make returns into actually spending more at the store when they visit. How? By offering incentives at the in-store returns counter and offering coupons/promotions when printing return forms online. Forever 21 can present promotional information and incentives to online shoppers who make returns that way as well.
You can establish an ideal returns process with a strategy based on information insights and technology enablement. First, leverage your ERP system to understand your historical returns data. View returns by rates, categories, seasons, channels, cost-per-return, etc. Include processing, shipping, transportation, and final disposition of all returns in every channel.
Then, map a new returns process, noting touchpoints along the way where you can upsell/cross-sell to the consumer. Remember – half of the consumers who find the returns process easy and fast actually spend more on their next purchase.
Want to learn more about how your apparel company can use technology to offer more generous returns processes and still improve the bottom line? Sapphire is here to show you the way – contact us today to get started toward a more profitable 2019.
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