How not to get spooked in a ‘phantom economy’

A nation of ‘serial returners’

UK shoppers are returning £7bn of purchases every year, creating a ‘phantom’ economy of lost revenue for retailers.

 Barclaycard’s latest UK study reveals this is having a huge impact on the state of retail with 26% of businesses reporting an increase in returns over the last two years. This figure rises to 37% among fashion retailers, with clothing and accessories among the most frequently returned items.

With rising rents, online competition, changing consumer habits and generous returns policies meaning 15-20% of all purchases are being sent back, it’s been a testing time for the high street.

Under UK law, retailers are obligated to offer more comprehensive returns policies than other countries. As three in ten businesses admit to increasing prices to cover the cost of managing and processing returns, retailers have a choice to make: fight this trend or adapt. 

The trouble with returns

We’ve all been there. You wait eagerly for your parcel to arrive, only to find your new trousers look nothing like they did on the model. What do you do? You send them back - and perhaps order more options next time, just to be on the safe side.

While retailers don’t like receiving items back at the warehouse, it’s important to remember that shoppers also don’t particularly like sending them. 60% of millennials admit to keeping purchases they dislike because they don’t want to deal with the hassle of returning them.  For most, not being able to try before you buy is a pain. Aside from not getting the item you wanted, it means standing in the post office queue during your lunch break and having a chunk of cash missing from your bank account while you’re waiting for the return to process. 

Phantom menaces

To get to the root of the returns problem, you first need to understand what makes customers want to return. The most obvious answer is because they didn’t receive the item they were hoping for, but this isn’t always the case. Consumer analysis data has revealed that certain shoppers return purchases 15 times more than others, with serial returners tending to fall into one of three categories:

  • People who buy lots of styles or sizes, intending to keep just one or two
  • People who repeatedly buy items to use or wear just once before returning
  • People who buy to try on and send back - just for fun

Sympathetic to consumer frustrations and behaviours, smart retailers are working to stay competitive by adopting a consumer-friendly approach to returns. 

The power of touch

Do you ever catch yourself touching clothing as you walk through a store? Research indicates that touch plays a huge part in how we spend. Scientists believe it stimulates pressure receptors on the skin and triggers the release of oxytocin, the hormone responsible for enhancing feelings of trust and attachment, while reducing stress levels.

It’s clear that psychology is an important aspect of how we buy. While walking around a store we buy into the context - the shop design, other products, maybe even the other shoppers. Psychologically-speaking, shopping online is a completely different experience. A third of online shoppers buy expecting that items will be unsuitable before they’ve even tried them on. As a result, the return rate in bricks-and-mortar stores is 9%, compared to a massive 20% online.  

Try before you buy

It seems that people want to touch items before a transaction takes place - a concept brands are starting to take on board. Hot on the heels of its same-day delivery, ASOS recently launched their ‘try before you buy’ service.

Customers with the app can order whatever they want online, have a huge ‘trying-on sesh’ at home, and only pay for what they keep - provided the goods are returned in their original condition within 30 days.

By embracing high volumes of returns, examples like this show an understanding of consumer needs. Shoppers can now choose from all the things they like without having to spend lots of money. Each product on the ASOS site also appears with a video of a model wearing it on the brand’s in-house catwalk. It’s only one small feature, but the videos make it easier to judge the quality and fabric of a piece of clothing.

About the size of it

A current hot topic in the fashion retail industry is inconsistent sizing between brands. It’s the number one reason given for returning clothing. Shoppers have taken to buying multiple sizes of the same item and returning those that don’t fit - a trend 27% of retailers say they have identified.

To this end, Zara recently introduced a feature that lets online shoppers enter their height and weight, as well as how they like to wear their clothes (loose or tight) to let them know what size they should order. It shows that clearer, more prominent sizing guides could have a dramatic impact on return rates. 

Clicks and mortar

Technology is transforming the shopping experience online and in-store. Forward-thinking retailers are implementing technology to assist their customers in making better purchasing decisions.

Both Ikea and Lego have introduced augmented reality functionality into their stores and printed catalogues. For Ikea, this means the customer can use their mobile device to scan items and view them in their home. For Lego it means a variety of playable AR Lego sets. Free to play and with no in-app purchases, Lego’s AR tool both promotes its products with ‘play-before-you-buy’. Happy kids, happy parents.

In future, we can expect to see AR and VR revolutionise the shopping experience in a big way, with US retailers Ralph Lauren and Neiman Marcus incorporating ‘smart mirrors’ to allow shoppers to flip seamlessly between different outfits. Some stores including Nescafé are adopting robotic shopping assistants like humanoid ‘Pepper’ to provide information on products, and help shoppers locate them in-store. Online we can expect to see AR ‘dressing rooms’, where customers can upload their precise measurements and photographs and be able to ‘try on’ clothing virtually before they buy.  

Bite the bullet

Of course, fancy AR tools and friendly robots can only take you so far. Did you know that 47% of customers would be reluctant to order from a brand again if they were charged for returns? With the state of retail as it is, success means accepting that returns aren’t going away anytime soon, and working to create as seamless a journey as possible for the customer.

Barclaycard have been leading the way in contactless technology for the past decade, with most high street retailers now on board. Simply making payments and returns fast and frictionless is the best way to weather the storm and keep your customers happy.