The real cost of ‘freeturns’ for retailers?

In today’s hyper-competitive online environment, ecommerce directors face a difficult choice when it comes to the thorny issue of online return policies. Despite being hugely appealing to consumers, free returns can have a catastrophic impact on retailers’ margins. According to industry experts Clear Returns, the cost of processing online returns in the UK alone currently stands at £20bn per year – an unsustainable figure, with very few businesses able to absorb return costs with ease.

It’s not just that the shipping, cleaning and restocking of items is an incredibly time-consuming and costly process (it takes an average of six weeks to get a returned item back to shop ‘floor’, according to Forbes), but that items must also often be re-sold at a reduced price, due to being in less than mint condition or simply because, by the time they are processed, they could have become last-season’s stock.

It’s no surprise, then, that a recent survey of retailers conducted by Brightpearl found that just over half (51%) agreed that their margins are being ‘strongly impacted’ by returns.

Of course, retailers do have the option of charging for online returns. But in doing so, they run the risk of alienating their customers, who may be deterred from making a purchase in the first place (negatively impacting conversion rates) and simply go to a more accommodating competitor instead.

Some 72% of online retailers are now concerned that the already significant impact on their margins from returns could worsen if the ‘try-before-you-buy’ trend – the biggest proponent of which is Klarna, the service launched in the UK by ASOS, which allows consumers to try on clothing without paying until they decide to keep it – becomes the norm.

Retailers now face a decision on whether the benefits of offering free returns, which include reduced basket abandonment, increased conversion rate and higher customer satisfaction and loyalty, outweigh the sizeable costs. Crucially, they also need to work out ways of reducing online return rates in the long-term.

Why are online return rates so high?

Shopping online, by its very nature, is more risk-prone from a customer perspective – particularly in categories like fashion, where it’s a perennial challenge for retailers to replicate the offline experience; the ability to touch, try on and try out the products in question.

The potential for an item to arrive that the customer isn’t enamoured with is therefore multiplied, and this where many problems arise. In some instances, there is little a retailer can do to avoid this happening – for example, if a customer simply decides they’ve had a change of heart, or if they have intentionally purchased multiple sizes and colours, with a view to returning unneeded ‘spares’. Currently, around 20% of all purchases in the UK include such duplications.

But in other cases, a mismatch of customer expectations vs. reality may arise due to poor-quality product content, whether that’s an inaccurate piece of product description copy or unrealistic photography. Research from Chargeback reveals that 22% of consumers have returned items bought online because the actual product appearance was different to that which was displayed on the retailer’s website.

How can retailers reduce product return rates?

For fashion retailers specifically, a number of technological panaceas have emerged in the past couple of years, including the likes of TrueFit and Fit Analytics, which utilise machine learning techniques to recommend appropriate sizes and styles to consumers, based on a vast bank of sizing and purchase history data.

However, a more fundamental way that retailers across all verticals can look to reduce product returns is by improving the quality of online content they are providing – enabling consumers to make better, more informed purchase decisions.

It’s absolutely crucial that all product descriptions on a retailers’ site are up-to-date, detailed and accurate. At Quill, we conducted a survey of British consumers and found that:

• 71% of consumers prefer descriptions that explain the benefits of the product, rather than just listing basic features.
• When shopping for clothing, 98% of consumers consider it ‘very’ or ‘quite’ important that the product description discusses how the garment fits, while 94% value reading about how the garment ‘feels’, in terms of fabric and texture.
• 90% of consumers are more likely to buy an item if the description includes specific dimensions or measurements.
• When shopping for clothing, 62% of consumers prefer product descriptions that include styling and ‘pair with’ tips.

Optimising product descriptions in line with consumer preferences therefore has the potential to significantly increase conversion rate – with the additional benefit of ensuring the customer is as informed as possible before they click ‘add to basket’, reducing the likelihood of them making a return.
 
One example of a brand doing this particularly well is TM Lewin, who have optimised their ecommerce store with highly detailed product descriptions that comprehensively discuss garment features, benefits, fit and feel.

In a digital-first ecommerce landscape in which consumers increasingly prize convenience above all else, retailers must take decisive steps to optimise the online shopping experience in order to survive – and content plays a vital role in doing this.

Producing genuinely helpful product descriptions is a bare minimum that many online retailers are, surprisingly, still neglecting – but which measurably improves critical ecommerce metrics, including conversion and product return rates. Providing a seamless online shopping experience that keeps customers coming back is the best way to mitigate the damaging impact of free returns on margins.

Wulfric Light-Wilkinson, chief commercial officer of ecommerce primary content specialist, Quill