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Fashion in recession:
increase your profitability through returns

04.01.2023 

Valeriia Kravtsova / Duncan McKay

In 2021, the average e-commerce return rate went up to almost 21%, which means that more than a quarter of purchased items was returned. From $4.583 Trillion in US Retail Sales in 2021, $761 Billion (16.6%) were returned. The number of returns mirrors peak sales periods, such as holidays, Black Friday, Cyber Monday and so on. Last year’s numbers clearly demonstrate it: from $887 Billion US Holiday Sales, returns are worth $158 Billion, which adds up to 17.8% of items returned. 

 

The numbers are staggering and not only result in operational headaches but have a broader impact on the whole business flow, which impacts all the stakeholders and above all aggravates the poor environmental situation.

This year, with a fast-approaching recession, political instability, fluctuating inflation rates, and cash-poor shoppers, retailers faced much more intense pressure, which resulted in a record $732 billion of stockpiled inventory as of July (a 21% increase from 2021), according to Census Bureau data


The returns problem is an eternal challenge brands face every year, and yet the post-holiday shock is yet to come. The question we will try to answer further is

How can you unlock the returns potential and quickly convert it into profits?

The first step to solving any problem lies in identifying its root causes. Let’s have a closer look at why returns happen in the first place. Globally, the main reason for online returns is poor size & fit. For this reason, many individuals use favourable returns policies to order multiple items to try them on and then return 80%+ that don’t suit them. Such practice is also known as “bracketing”.

 

Given the problem of returns is not new, one would think that think brands and retailers would be jumping all over this. However, it is not true.  It’s challenging to get a handle on the problem, its causes, and what really is happening.  It's difficult to know where to start.  

 

The key to the returns problem is to start from first principles.  This means following a series of simple steps and actions. Let's look into it.

 

First and foremost, measure your returns and log the details and costs (courier, remerchandising, write-off costs of items not for resale). By quantifying the impact of the returns, you will understand what you are dealing with. Once you’ve done this, establish a baseline time period for comparison so that you can track the fluctuations of the returns cycle. As a third step, set up an ongoing returns measurement process – this could be manual (excel sheet) or automated with a provider such as Loop Returns, Return Logic or Return rabbit. This way, you will always keep abreast and measure your returns in a holistic manner.

 

See? Doesn't sound that complicated, nor does it require heavy investment upfront. However, this is only the first step towards unlocking the "Returns Potential". 

 

Download our "Returns Playbook" and find out more about how you can decrease your return rate and boost sales growth in 5 simple steps. Start today!

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Valeriia Kravtsova (lead author)

LinkedIn

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Duncan McKay (editor)

LinkedIn

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