The rise of the internet as a channel of purchase and distribution has been a major transformation for consumers and also for many retailers. Whilst distance selling including mail order had been present for centuries, the internet offers a radically different proposition overcoming distance and time in many cases. As can be seen in the growth of sales volumes, consumers have taken to the channel.
There has also been a long tradition of academic research into the area of ‘rogue’ customers. This has many facets but one angle has focused on customers who buy products (often clothing) in the knowledge they will return them – either after trying them on at home or after use! This phenomenon existed before the internet, but has grown steadily. Internet shopping has given such behaviour a tremendous boost. With rapid delivery and relatively easy return, consumers have begun to order more products, try them on, select or use one or none and then return some or all of them to the retailer. There are a number of issues with this.
For the consumer there is the possible hassle of sending back products and waiting for reimbursement. Sometimes there is real cost as well as time in this. Retailers however have been trying to make this as easy as possible for consumers in the belief that this is great customer service which provides loyalty and protects sales.
For retailers there is the obvious real distribution cost, the opportunity cost of lost sales and possible damage, as well as the need to spend time and money on handling returns and organising repayment. If not careful, the sheer volume of this work skews the business model and affects profitability.
Since starting this blog I have received a number of unsolicited reports and offers of material for promotion or publication. I tend to be very selective as many have somewhat questionable statistics (and motives) and most are out to sell something. I am flattered but hopefully not deceived. Most get read and then forgotten.
But, one the other week did grab my attention. It was on the ‘returns tsunami’ that the new internet retail model of “Try Before You Buy” threatens to unleash. ASOS is one of the leading pioneers of try-before-you-buy, launching its initiative in November 2017 in conjunction with payment partners Klarna. The firm has since been followed by other retailers including Top Man and Schuh.
This option enables customers to order multiple items before deciding what they’d like to keep. There’s no upfront cost – shoppers simply pay for anything they keep after a certain number of days, usually thirty days following dispatch. They return anything else that they don’t want, for which they are never charged. It means that customers can order and try items as they would in-store but crucially they do not have to wait for returns to be processed in order to receive reimbursement for goods that they don’t want.
For a consumer this offers a benefit of not paying for things immediately but the disadvantage of moving closer to the club or subscription model. It adds another reason to order more products. For retailers it perhaps provides some control of a current situation but does need to be well managed, certainly in terms of returns. They hope that once consumers have the product in their hands they will either love it or forget to return it and then get charged. And yes, the authors of this report do have an angle, as they have systems to help make this work.
I am not sure how this will be taken up – by retailers or consumers – but there is a real point here whatever happens. Internet retailing is changing how we shop and how we think about shopping, and retailers have to cope with the fall out from this. Being efficient and effective for returns, for both consumer and business reasons, is now part of doing retail and some are doing it better than others. This is what marks it out from old style hire purchase catalogue retailing, where after all you also got the product before you paid for it.
The report can be downloaded here.