The problem of returning clothes to online stores

Analysts predict a 75.2% increase in online shopping returns in the USA by 2020. Currently, around 50% of shoppers return clothes they have bought online because of sizing issues. Furthermore, many customers engage in so-called ‘bracketing’, i.e. they buy the same item in multiple sizes, try them on at home, and return the ones that don’t fit. Each return represents lost revenue to the retailer, because of shipping and warehousing costs. If the system for processing returns is inconvenient, the online store may lose customers. Another factor is the issue of online retail giants attempting to curtail the actions of shoppers who return large volumes of clothing. Size suggestion engines can reverse this trend and reduce the number of returns by 20%.

Overview of global returns trends

• KPMG analysts have found that the cost of handling a return can be as high as three times the cost of delivering the item in the first place.
• According to a 2019 consumer report, The State of Online Returns: A Global Study, a double-digit percentage of customers globally said that they were less likely to use a retailer again after a bad experience during the returns process.
• Bracketing has become a real cost driver: many customers buy with an explicit plan to immediately return some or all of the items. Almost a fifth of online fashion purchases include orders with several items of the same size, shape or colour because customers expect a free or cheap return.
• Returns damage the environment and increase congestion and CO2 emissions. US returns alone create 2.3 million tonnes of landfill waste and 15 million tonnes of carbon emissions annually.
• Retailers churn 31% of new customers and 8% of repeat buyers due to poor returns services, and 20% of new customers report finding the returns process to be complicated.
• The holiday period leads to increased problems with returns because it’s the high season for gifts. Accordingly, satisfaction with gift returns is 13–15% lower.
• 17–23% of buyers would like to avoid returning goods and order fewer duplicates to reduce the overall environmental costs of returning goods.

Returns trends by country

USA: According to a study by Narvar, US shoppers are more likely to return an online order when the size, fit or colour is wrong. They are more satisfied with online returns overall. They are the most likely to check refund statuses after completing an online return.

Germany: The largest percentage of returns in Europe. Most likely to have an online return picked up by a carrier. A majority of German shoppers want to see the return policy stated on a site’s homepage. They are the least likely to support a ‘no questions asked’ return policy. Heaviest bracketing of purchases (72% of shoppers).

UK: Many customers (61%) use their home as a fitting room. Satisfaction is strongly tied to being able to drop off the return at a convenient location. There is a higher interest in drop-off locations near homes and drop boxes, and easy parking for returns.

France: The highest level of dissatisfaction with the online returns process. French shoppers are most likely to buy luxury goods online. They show the greatest interest in the environmental policies of online retailers. Online stores have made the returns process much easier for the customer.

Australia: Most likely to return directly to retail outlets, and the most likely to get a refund without sending a return back. Mostly Australians churn after a bad returns experience. Australian customers also demand flexible delivery options.

As noted in the Twenga report based on a PostNord study, the top returners live in Germany (41%), the Netherlands (36%), and the United Kingdom (32%). Italians and Spaniards rate a ‘hassle-free returns process’ as the most important factor when shopping online. They have the lowest returns — only 18% in Spain and 13% in Italy. Experts believe that people in Southern and Eastern Europe have lower incomes and less money to spend on clothes, so they make an effort to research what they really want to buy.

Sizing problems

Even though some brands have expanded their sizing to fit more people, 88% of consumers are frustrated with regards to sizing inconsistency, especially where it relates to vanity sizing. For 46% of customers, the size, fit, or colour was wrong when making returns to retailers. Bizrate Insights conducted a survey of 1,052 consumers in June 2019, finding that 55% of shoppers noted size as the main reason for returning an online purchase.

Furthermore, Return Magic surveyed 1,000 businesses across multiple industries and compiled data from over 800,000 Shopify customers. Consumer preference-based reasons for returns (e.g. size, fit, style) tend to drive around 72% of all returns for fashion items. Non-preference-based reasons (e.g. defective or not as described) account for 10% of the total.

Top reasons for returns

1. Size too small: 30%
2. Size too large: 22%
3. Changed my mind: 12%
4. Style: 8%
5. Not as described: 5%
6. Defective: 5%
7. Other or not specified: 18%

Moreover, customers order more clothes of different sizes because retailers don’t provide enough information needed for the transaction. Women’s clothing is returned by 35% of buyers and men’s clothing by 16%. 35% of new shoppers and 40% of repeat shoppers would be happy to exchange the item they have purchased for another size instead of returning the money.

Bracketing

Ecommerce serial returners acting as wardrobers and fitting roomers create additional problems and costs for online stores. Usually, wardrobers wear clothes once and return all of their purchases. Fitting roomers purchase different sizes and colours of the same item, pick their favourite and return the rest. In late 2018, the Wall Street Journal reported that Amazon had begun banning shoppers who “made too many returns”.

15% globally say they only bracket when sizing or other options aren’t clear, while 56% of shoppers treat the home like a fitting room. Fitting roomers comprise mostly younger people: 71% of Gen Zers; 67% of Millennials; 52% of Gen Xers; and 36% of Baby Boomers.

In the US, bracketing increased from 40% to 50% from 2017 to 2019. 40% of people think it’s easier to return items to a store. In the UK, 34% (versus 31.4% in 2018) of consumers regularly do the same.

Different retailers react differently to fitting roomers. ASOS says “it won’t withhold customers’ money if they’ve sent in returns”, but if it suspects customers are wearing items and returning them or order excessive quantities, then the company may ban accounts. On the other hand, numerous brands are continuing to promote try-on-at-home programmes despite rising costs. The luxury footwear brand Inez took the following view: “Customer satisfaction surveys around the try-at-home programme indicate it’s a winning feature for shoppers, and the brand is on track for 100% revenue growth in 2019.”

Losing money

Total apparel returns amount to nearly $4.71 billion in lost sales for US retailers. Apparel accounts for 12.78% of returns of all consumer goods. In 2020, this amount may grow by 75.2% compared with four years prior. For instance, in 2016 in the UK “£600m worth of products bought over Black Friday and Cyber Monday was tied up in return loops by the middle of December”. Germans returned about €5.5 billion worth of goods in 2018, a study by the University of Bamberg found.

The Reverse Logistics Association explains that managing the ‘return and repair’ process accounts for 10% of total supply chain costs. But if the supply chain gets stuck (due to inefficient processes), it can compound and reduce profit by 30%. It can cost double the amount for a product to be returned into the supply chain as it does to deliver it, says Iain Prince, supply chain director at KPMG. He notes that delivering a clothing order usually costs £3–10, but it could cost double or treble that “to be processed on the way back”.

As a result, returns increase labour costs due to inspections and restocking time, as well as leading to markdowns and out-of-stocks. Higher returns require more working capital to source merchandise.

Cases for reducing returns

Applying size suggestion engines can resolve misunderstandings with sizing and overcome bracketing. The case of Sizolution shows that implementing its widget at the online retailer KUPIVIP has decreased returns by 20% and increased revenue by 30%. The Sizolution Fit Assistant was installed on the KUPIVIP website. Using the widget, customers were able to get unique size recommendations and fit predictions for each product. Similar size suggestion engine projects affirm that return rates for apparel can fall to as low as 5%. When customers are confident that your clothes are a good fit and that they flatter them, they’ll buy more.

There is a further opportunity to improve sentiment for environmentally-conscious shoppers via operational changes and simple messaging, for example by underlining that returns negatively affect the environment. This can involve encouraging no returns as a greener choice (especially when it comes to reducing bracketing).

And of course, retailers must remember to give accurate information about clothing, especially regarding fit and colour.