How to up your e-commerce game for profitability in 2024
To improve e-commerce profits, brands need to shift their e-commerce strategy from growth at any cost to one of sustainable revenue.
While online retailers have enjoyed growing sales as consumers increasingly rely on e-commerce, they’ve also dealt with soaring returns. It’s a costly problem that takes a huge bite out of the bottom line, especially for online apparel retailers.
According to a new study by Coresight Research, the average return rate for clothing ordered online is 24.4%, nearly 8 percentage points higher than the overall online return rate.
The firm estimates that will mean $38 billion in returns for apparel retailers, with $25 billion in processing costs this year.
“The high return rate is a growing issue for apparel brands and retailers, substantially impacting revenues and costs, customer satisfaction and loyalty, as well as sustainability,” researchers said.
The stark data comes as retailers take a number steps to curb the number of online returns, including charging consumers for returning items.
No. 1 reason for online apparel returns: Poor fit
Buying clothes online can be tricky. Unless it’s something you’ve bought before, how can you tell if it will fit?
So no surprise here: Incorrect sizing and fit is the top reason for online apparel returns, Coresight Research found. Color and damage were the second and third top reasons behind apparel returns, according to the survey of 100 decision makers at US-based apparel brands and retailers.
Pants are the top item returned by far, with 65% of respondents citing it as returned more often than other types of clothing. Underwear and lingerie are the least returned.
Fifty-eight percent of retailers and brands polled said at least 20% of online clothing orders were returned in the last year. Forty-five percent said online returns had grown either moderately or significantly over the past two years.
A factor in the explosion of apparel returns is the practice of “bracketing” when shoppers purchase the same item in multiple sizes and/or colors. Shoppers do this, knowing they can easily return the items they don’t like for free.
Bottom-line, environmental, and CX impacts
Shipping, inspecting, processing, and restocking costs associated with e-commerce returns add up, cutting into a retailer’s online profit.
In fact, when apparel retailers imagine a zero return rate, they see a 20% boost in their bottom line, the Coresight Research survey showed.
Returned items don’t necessarily wind up back on the shelf. Due to the high labor cost of processing returns, retailers often sell them at sharply reduced prices to third-party sellers like liquidators.
With some returned items end up in landfills or are even destroyed, online returns are simply bad for the planet. Consider also the added emissions from all the shipping back and forth, and packaging that’s tossed in the trash.
For consumers, having to return an ill-fitting shirt or pair of pants can be frustrating, especially when the returns process isn’t easy. The experience can turn them off from a brand forever.
Sustainability in fashion: Industry teeters on ethical catwalk
Sustainability and fashion appear to be on opposing catwalks destined for collision. Fashion is a $2.5 trillion industry, producing 10% of global carbon emissions, 20% of global wastewater, and vast biodiversity loss. Consumers are demanding change, forcing sustainability in fashion as a requirement, not a trend.
Retailer strategies to reduce online apparel returns
Retailers have long offered free returns to entice online shoppers, but the high cost of returns has some rethinking the common practice.
Several major retailers have begun charging shipping or restocking fees for returns. They include Zara, Abercrombie & Fitch, J.Crew, and JCPenney. Even Amazon is pulling back; the e-commerce giant reportedly began charging a fee for some returns at UPS Stores.
Other strategies that apparel retailers are using to reduce e-commerce returns include:
- Virtual try-on tools to boost consumer confidence in fit and style. Eighty-five percent of respondents in the Coresight Research study either currently use or plan to use this technology.
- Updated, accurate product descriptions with high-quality visuals such as 3D images.
- 3D body scanning technology to provide online shoppers with more precise sizing and fit.
- Adjust return policies based on shopper profiles that are linked to transactional data. For example, charge serial returners stocking fees.
- Personalize the buying experience to offer items based on a customer’s past purchases to ensure better fit.
- Encourage customers to make more sustainable decisions with discounts or other benefits for picking up in store or shipping items together.
