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Many fashion retailers are feeling a pressure on their margins due to delivery costs and price deflations.

This is a tricky area for fashion sites, as they have higher than average returns rates due to the fact that customers cannot try items on before buying. 

This article looks at a few ways on how to combat this downward trend.  

If cheap credit put customers on a pedestal, online retail gave them immortality

Under the Sale of Goods Act 1979 any item you purchase from a retailer should be as described, of a satisfactory quality and fit for purpose.

This means, if a product turns out to be damaged or faulty at the time of sale, or if a fault emerges over a reasonable period of time, you are entitled to a refund, repair or replacement from the retailer. 

Distance Selling Regulations demand that when you buy goods online, over the phone or by post you have seven days grace after placing your order to change your mind and cancel, this can be for any reason.

You will, however, need to notify the retailer in writing within this time frame and return the goods within 21 days if they have already been dispatched. 

The cooling off period given to online consumers seemed sensible, if customers can’t evaluate the item at time of purchase they could be left with a defective or substandard product. It is also a good way to build confidence in a developing sector that initially only added negligible amounts to commerce in the UK.

However, ordering 15 pairs of jeans and sending 14 back seems to be an abuse of a system by the very people that the Sale of Goods Act set out to protect.

Short-term, the company’s revenue is increased but long-term the volume of returns hits the bottom line. Add to this the continuous discounts offered by many sites that can result in the brand premium being massively devalued.  

An article in Drapers (August 2013) highlights the British retail consortium’s latest figures on clothing and footwear, showing a price deflation accelerating over the last six years. This is clearly not a good sign for the industry. 

Here are a few of the tactics that multichannel retailers have actively used to maximise margin and minimise returns.  

Discount duration

Keeping discount periods to a minimum. Companies that are seen regularly discounting their products start to attract deal hunters.

Both Next and Fat Face made brave discounting cuts and saw substantial increase to their profits.  

Postage decisions

Delivery and returns charges should be informed by the finance team and not the marketing division.

There are many instances of companies spending more on delivering an item than the value of the product itself. This might result in the growth of the top line but massively hits profits.  

Ensuring the size is right 

Sizing seems to be a big problem across the industry and an issue specifically related to high returns. Many companies are trying to tackle this by using technology along with more simple tactics.


Metail, a company based in Cambridge has launched a virtual fitting room that provides users with a 3d view of clothes on their body type and is being used by Zalando and Warehouse. The companies declined to comment on the results.  

Donna Ida, a small but premium denim company, has opted for a more simple solution by offering women a visual sizing chart in parallel with a photo uploaded service where someone manually sends feedback. 

Free returns

The returns policy in the Sale of Goods Act is that items can be returned by informing the seller within seven days but does not specify that the seller should pay for these returns (unless faulty). 

Many companies offer up to 28 days full refund along with free returns that really hurt and is not required.

Duchamp, a men’s luxury fashion site, offers a full refund if the items are returned within seven days of receiving the goods. After this period customers are given a credit to buy again in the future. 

According to Lewis Hamilton from Duchamp:

Duchamp offers free delivery for purchases only over £150 but offers free returns only if an item sent was faulty. Further during the sales period we try and limit returns by following a strict seven days policy and offer customers credit notes if the returns are after the seven day period.

We also try different ideas on delivery such as the new free returns policy on hardest to fit clothes like suits that actually help our customers shop online without diluting the premiums that our products command.

This is one way to reduce losses from returns, but brands must also consider the potential harm in terms of customer retention of offering harsher returns policies than competitors. 

Product details

There is always an element of the unknown when buying online. This unknown can be reduced by offering additional information on product pages.

This should include the type of material, high resolution images, zooming options on products and 360 degree views.

Most companies have taken the effort to provide consumers with these additional details but then there are still companies with great clothes that keep the information quite basic.

Here is an example of men’s clothing brand Lambretta where the only useful feature is zooming.

  

There is a fine line between driving away potential customers and increasing margins when it comes to charges and policies relating to fulfilment.

However, it needs to be constantly monitored by retailers to safeguard their bottomline, and ensure that costs aren't harmful to the business.

JUMP is all about creating seamless multichannel customer experiences. Now in its fourth year, the event will be attended by more than 1,200 senior client-side marketers. This year it forms part of our week-long Festival of Marketing extravaganza.

Anant Swarup

Published 11 September, 2013 by Anant Swarup

Anant Swarup is Director Client Services at Mediarun Search Limited and a contributor to Econsultancy. You can connect on LinkedIn or Google Plus. 

1 more post from this author

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Stuart McMillan

Stuart McMillan, Deputy Head of Ecommerce at Schuh

Hi Anant,
Not sure I agree with "Delivery and returns charges should be informed by the finance team and not the marketing division.", as these can be effective levers to help purchase.

Some companies have been successful in using free delivery thresholds to persuade users to spend more to then meet the threshold.

Also, delivery promotions can be an effective method of encouraging sales (the introduce a scarcity element if only done for a day or two), without eroding product price points (and hence perceived value).

I have also done some analysis on free returns (not just for faulty goods) which indicates that customers who had the option of free returns *did* return more, but they also bought more. In fact, their net value was double those who were paying for returns.

about 3 years ago

Graham Charlton

Graham Charlton, Editor in Chief at ClickZ Global

Hi Stuart, interesting points. I guess there needs to be some assessment/overview of conversions vs costs, but good that positive and helpful returns policies and charges work better than more restrictive ones.

I see Schuh only charges for delivery on orders under £5, which must be rare. Have you tried a higher threshold before?

about 3 years ago

Stuart McMillan

Stuart McMillan, Deputy Head of Ecommerce at Schuh

Hi Graham, the £5 threshold is to try and control the case when people might just order a pair of shoe laces. We used to have a higher threshold, but effectively eliminating was a great conversion booster, there's really no doubt in our mind about that.

We're currently trialling free returns just now (via collect+), it's too early to say what impact it is having, no doubt you'll hear in due course!

about 3 years ago

Anant Swarup

Anant Swarup, Founder & Director at Mediarun

Hi Stuart, completely agree that a free delivery/ return policy can be a good lever to increase basket values and revenues.

However this does not necessarily always equate to an increase in margins.

My suggestions is for companies to evaluate the trade off between incremental revenues and delivery charges and accordingly set a threshold where the finance team an have a big input as they are much closer to these numbers.

Interesting point on (High returns = Increased baked value/lifetime value). Will look into this and see if there are similar trends with our clients.

about 3 years ago

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Ceri Heathcote

Interesting to see retailers now offering virtual changing rooms. I definitely think the more information the better. Accurate sizing information, style guides and customer reviews are all great ways of doing this. Also would be great to know what size the model in the photo is wearing as some retailers do.

about 3 years ago

Seema Kumari

Seema Kumari, Head of Digital Marketing at Hearst Magazines

Has anyone carried out any analysis to see who the cluster of return customers are?
Ie are they also the big spenders and loyal customers?

about 3 years ago

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