Apparel April 2019 Apparel May 2019 issue | Page 71

INDUSTRY INSIGHTS
decision based on a retailer’s return policy. The
research also showed that features like restocking
fees, return shipping fees, and short time limit for
returns were the leading reasons for preventing
them from shopping from a particular retailer.
FINDING THE RIGHT BALANCE
The interesting thing about returns is that
it is seen very differently by customers and
businesses. As we’ve discussed, for businesses,
free returns is a means of attracting customers,
albeit an expensive one in some cases. But
for customers, it’s a preferred means of finding
a trusted retailer. For example, in the case
of successful fashion platform Revolve, the
company had US$400 million in net sales but
US$385 million in returns, and despite this, their
accounting figures were excellent. The company
had an average of 7.3 million unique visitors
monthly, delivered 74 per cent of net sales at full
price, retained 88 per cent of net sales from past
year customers and managed a gross margin of
48.5 per cent.
This is because high returns actually indicate
high volume of sales and trade, which in turn
establish the popularity and consumer preference
for the brand. The trick is for businesses to
find ways to reduce their return costs and
ensure minimal returns to begin with. And this
is a very achievable goal given the advances in
modern technologies like Enterprise Resource
Management, Product Lifecycle Management,
Warehouse Management Service and others.
Research has shown that companies need to
make very small but specific improvements in
their processes which can net them significant
benefits. A case study from Smart Company
shows that companies making low-cost
investments in communications and equipment
can easily make nearly US$25 million in savings.
These savings are equivalent to about the same
as the net profit they would normally gain from
about US$2.5 billion in additional sales.
If e-commerce platforms really wish to win
customers while reducing costs, they have two
broad choices. The first, as described above,
requires them to make adjustments to their
process workflows and find areas of improvement
whereby they can minimise the cost of returns.
The second, as we said earlier, is to remove
the need for a customer to return goods, and
this is where next-generation technology
adoption becomes mandatory. With emerging
tools like virtual reality and augmented reality,
we are already seeing the early stages of
consumers having the full range of the offline
shopping experience while in the comfort of
their own home. However, until this technology
is mainstreamed, removing free discounts may
prove risky for apparel brands and can lead to a
dangerous outcome for the business.
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