E-Commerce Fashion’s Return Problem and Tech Solutions to Reduce Costs

When it comes to the fashion industry, dealing with returns is more than just an occasional issue—it's a full-blown challenge. Unlike gadgets or books, fashion items aren't just about working right; they have to fit and flatter, matching the diverse tastes and sizes of customers. That's probably why a whopping 80% of buyers who've returned an online purchase have sent back clothing, according to insights from Shippo and Loop.

Fashion is notoriously at the top of the returns chart. A Statista report points out that in the last year alone, 26% of shoppers returned clothing, followed by shoes at 18%, bags at 17%, and accessories at 13%. Compare that to just 11% returning electronics and even fewer kicking back beauty products (9%) or entertainment goodies like books and video games (7%).

Why So Many Returns? 

Fashion E-Commerce faces a unique set of challenges that often lead to high return rates. Understanding these factors can help retailers develop better strategies to minimize returns and improve customer satisfaction. Let’s explore the common reasons in more detail:

Lack of Transparency

A major frustration for online shoppers is when the product that arrives looks different from what was advertised. Misleading or vague product descriptions can set the wrong expectations. This misalignment often results in returns as customers feel they did not receive what they were promised. To counteract this, retailers need to ensure that their product images are accurate and descriptions match the actual characteristics of the item, including details about the material, care instructions, and more.

Damage and Defects

Receiving damaged goods is understandably disappointing. Whether it’s a tear in a new dress or a scuff on a pair of sneakers, such issues are often due to inadequate packaging or mishandling during shipping. Retailers can address this by investing in better quality packaging that protects the items during transit and by choosing reliable shipping partners who handle packages with care.

Change of Mind

It’s human nature to change our minds; what seemed like a perfect choice online might not resonate the same way once it arrives. While this is harder to control, retailers can reduce the incidence by providing as much information as possible to help customers make informed decisions. Enhanced interactive elements like AR try-ons or showing products in various settings can help customers better visualize the items and reduce post-purchase dissonance.

Fit Issues

One of the most common reasons for clothing returns is poor fit. This issue stems from inconsistent sizing across different brands and the absence of a standard sizing system. Retailers can mitigate this by offering detailed sizing charts, customer reviews that include fit information, and recommendations based on customer's previous purchases or their body dimensions.

Quality Concerns

When the quality of the product doesn't meet expectations, it's a straight route back to the retailer. Quality issues can range from poor fabric to subpar craftsmanship. Clear quality descriptors, high-resolution images, and honest customer reviews can help set the right expectations. Additionally, implementing strict quality control measures before shipping can ensure that customers receive products that meet their standards.

Color and Appearance Discrepancies

The frustration of ordering a navy blue item and receiving something that looks black under different lighting is real. Such discrepancies often arise from variations in screen displays or lighting conditions in photos. Retailers can overcome this by providing images under various lighting conditions and using color-accurate photos. Offering a color swatch for more accurate previews can also help.

The Real Cost of Fashion Returns

Handling returns in the fashion industry is COSTLY. According to Optoro, every $50 item returned can erode between 10% and 15% of its retail value. The expenses associated with returns are multifaceted, impacting various aspects of business operations. Let's dive deeper into these costs:

• Labor Costs: The expense of processing returns goes beyond just the act of taking an item back. It encompasses several labor-intensive activities: receiving the returned merchandise, inspecting it for quality and usability, and restocking it appropriately. Each of these steps requires manpower, which adds up to about $15 per return on average. This cost not only reflects the wages paid but also the opportunity cost of diverting resources from other potentially profitable activities. 
  
  
• Logistics: The logistics of reversing a sale include the cost of shipping the item back, which averaged about $10 per package in 2021. This expense is particularly significant as it often involves priority shipping to expedite the return process, enhancing customer satisfaction. Additionally, the logistical challenge increases with the need for specialized packaging to prevent damage during transit, which can further elevate costs. Efficient logistics planning and perhaps negotiating better rates with shipping providers can help reduce these expenses.
  
  
• Reselling Challenges: When products are returned, they often cannot be sold as new. This might be due to minor wear, removal of tags, or simply because the item has been out of the retail loop long enough to no longer be considered 'new.' To recoup some of their losses, retailers typically have to offer these items at a discounted rate—sometimes up to 25%. This discount not only affects the direct revenue from these products but also potentially devalues the brand's perception if too many items are seen as discounted or less than perfect.
  
  
• Damages: Perhaps one of the most frustrating aspects of returns is dealing with damaged goods. Items can and do get damaged on their return journey, sometimes severely enough to render them unsellable. The financial impact here is direct: these goods often end up as write-offs, which are direct hits to the profit margin. Implementing stricter packaging standards and perhaps insuring high-value items during transit can help mitigate these losses.

Effective Return Management Strategies

Clear Return Policies

Establishing a transparent and straightforward return policy is key to reducing customer anxiety and confusion. It's essential to communicate clearly about what can be returned, the timeframe for returns, and the condition items need to be in. Include details about who covers return shipping—this clarity can significantly reduce frustration and enhance customer trust. More than just being clear, make sure your policy is easy to find, not hidden away in the footer of your website. Consider including FAQs that address common concerns to further guide customers and streamline the process.

Accurate Product Descriptions

In-depth, accurate product descriptions are your first defense against returns. Take the time to describe every aspect of your products, from material and care instructions to design details. Include high-quality photos from multiple angles and videos if possible to give a realistic preview of the product. Engaging content that accurately reflects the product helps set the right expectations. It’s also beneficial to include reviews and feedback from other customers, which can provide honest insights and reduce uncertainty for potential buyers.

Thoughtful Packaging

Proper packaging goes beyond aesthetics—it's about making sure items arrive in pristine condition. Utilize materials that are sturdy enough to withstand transit but are also environmentally friendly. Consider the unboxing experience; it should be an extension of your brand experience. A well-packaged item not only impresses but also reassures customers of the quality they can expect from your store. Furthermore, thoughtful packaging can often make the difference in whether an item is returned due to damage, or kept with satisfaction.

Comprehensive Size Guides

Misfitting items are one of the top reasons for returns. To combat this, provide detailed size guides that include not just the measurements but also how the clothing fits on different body types, the stretch of the fabric, and best use scenarios. Interactive tools like virtual fitting rooms or features that let customers input their dimensions to find the best fit can drastically reduce the likelihood of returns. Encourage your customers to measure themselves and compare these measurements to your charts to ensure the best fit possible.

Automated Return Systems

Leveraging technology can streamline your returns process dramatically. Automated Return Merchandise Authorization (RMA) systems allow customers to initiate returns quickly, reducing the workload on your customer service team and speeding up the process to redeploy returned inventory. Consider integrating smart solutions like Returnless which facilitates smoother returns by allowing customers to handle them directly through an automated, user-friendly platform. This not only improves efficiency but can also enhance customer satisfaction by making the return process hassle-free and transparent.

Automating Returns in the Warehouse to Lower Costs

Think of returns as inventory waiting to be converted back into cash. Relying on a manual process to keep track of returns wastes dozens of hours every week on a system that can easily be automated. This inefficiency leads to unnecessary friction with customers and a lack of internal communication. Managing returns manually also presents several challenges like time-consuming and labor-intensive inspection and delayed relisting of items for sale.

Returns Receiving

A Warehouse Management System can help speed up and streamline the returns receiving process. By enabling you to scan and capture return information—such as the RMA number, product SKU, quantity, or serial number—using barcode scanners, RFID readers, or mobile devices, a WMS ensures efficiency. It can validate and update return information in real-time, alerting you of any discrepancies or issues, such as missing or damaged products, incorrect or expired items, or unauthorized returns.

Correct Order Processing

Processing orders correctly is crucial for optimal stock control. By making the order picking process as easy as possible, you minimize the chance of stock discrepancies. Proper order processing is also important for accurate stock forecasting. By facilitating the picking process with stock locations, you can automate the packing process. For instance, the software can issue notifications based on set rules, such as when a product should be packed extra carefully or when an additional product can be added to an order. The shipping method can also be determined automatically, so the shipping label prints directly from the printer.

Data-Based Decision Making 

A WMS also enhances visibility and accountability in the returns process. Comprehensive and customizable reports and dashboards show key metrics like return rate, return reasons, return cost, return cycle time, and return recovery rate. This data helps analyze and improve the returns process by identifying root causes and patterns, gaps and opportunities in returns policies and procedures, and best practices in the industry.

While returns are an inevitable part of the fashion industry, there are effective strategies to manage them. By addressing the root causes and implementing efficient management strategies, retailers can turn the challenge of returns into an opportunity for enhancing their operations and customer experience.