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: peter@fits.me

Phone: 0845 528 0570

www.fits.me