Profit vs Planet: The true cost and untold waste generated by Ecommerce Order Returns
Global fashion e-commerce is booming forecast to reach $706 billion by 2022. Incorrect fit accounts for on average 40% of lost profitability, resulting in a $282 billion return problem. With online shopping growing exponentially and expectations for seamless, accurate and personalized experiences at an all-time high, retailers are actively looking for innovative ways to increase the bottom line. Unfortunately, the $282 billion return problem is only a small part of a highly complex issue which impacts us all socially, environmentally and economically.
Can we give customers what they need, maintain brand integrity, sustainability AND be profitable?
In late 2017 we were A/B testing our first time fit technology that helps online shoppers find their perfect fit the FIRST time. The initial pilot results were very encouraging, we increased sales by 72.5%, encouraged repeat purchases by 66% and lowered returns by 34%. Customers provided rave reviews; 97% said our solution removed sizing guesswork and 95% said it increased fit confidence, influencing buying behaviors. By amortizing the pilot results over 12 months our solution would positively impact the retailer’s bottom line by over $500,000.
Additional data highlighted the true costs and untold waste generated by returns.
Double handling, postage, re-warehousing, subsequent discounts, and waste all contributed to the problem, further diluting profit margins up to an additional 18% of sales. It highlighted an opportunity to add further value by helping retailers build more robust, sustainable and profitable supply chains from hanger to hoe.
To better understand the challenges, we have to look at the current behaviors.
We are living in a world of hyper-consumption, where customers are encouraged to consume often more than what they need. This insatiable appetite is fed by “buy now pay later” incentives and the plethora of new products available to us on a weekly basis at cheaper prices. With no global sizing standard and every brand and garment sizing differently, with huge disparities in the same brand, customers are faced with an impossible question of “what size am I?”. To counter sizing guesswork they purchase 3 sizes for 1 item in the hope that 1 fit. What inevitably happens is they either return 2 items or worse, these unwanted goods go to landfill.
To remain competitive in this accelerated consumer-driven market, retailers are having to produce greater quantities of products that are actually required, in more frequent cycles, at a fraction of the former cost. What that means is that the integrity of the supply chain is often compromised, either forfeiting quality and/or negatively impacting on the human resources and lifestyles of many on the manufacturing side.
Result of behaviors
Products become available at competitive prices but with inaccurate sizing charts and every customer, brand, and size is unique, we are back to square one; churning through new customers, butchering conversion rates and reducing profits as we rack up costly returns that generate waste.
It is a tumultuous cycle, but we have found a way to give customers what they need, maintain brand integrity, sustainability AND be profitable.
By capturing customer data we can accurately profile body shapes and sizes by region, country, and brand. Running multiple data sources through our algorithms enables us to minimize variances, creating greater consistency in sizing to improve fit. In-depth product SKU data identifies any flaws within the design or production process, pinpointing improvements that minimize the production of wasted stock. Aggregated purchase and return data supports the accurate prediction of quantities and sizes for production by product SKU, increasing profit and reducing environmental impact.
Co-Founder & CEO at To Me Love Me, Penny is a passionate innovator. Her mission is to educate, empower and collaborate with industry leaders looking to make a positive impact. She believes in the power of data and harnessing insights to make better business decisions that deliver measurable results. Contact her at 0413 697 341 or 2 Me Love Me