Clear Returns changes the way retailers think

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1 Clear Returns changes the way retailers think Understanding the causes, likelihood and impact of returns helps to drive profitability It s not what they buy, it s what they keep. Shopping behaviour has changed forever. No longer are we fighting queues for the changing rooms to fight our way into toosmall jeans, then fight the embarrassment of having to return every pair to the assistant who is at best, busy, and at worst, disinterested. The tables have turned. For consumers, shopping from the comfort of your own armchair, detached from all human contact and with the ability to return every purchase with impunity, is irresistible. And the value of e-commerce sales is increasing rapidly as a result. In the US alone, online clothing sales are predicted to grow by 16.4% by 2016, compared with 13.3% for the ecommerce market as a whole. Good news, surely, for retailers? Not exactly. This increase in sales is being mirrored by a costly increase in returns, causing an erosion of profits that retailers simply cannot afford to ignore. The rate of online returns differs based on industry and location, but analysts say anywhere between 25% and 50% is commonplace Michael Miller, BBC News In hard numbers, returned products cost global ecommerce retailers $200 billion in cash and lost profits in This does not take into consideration the opportunity cost of lost business as a result of poor customer experience, and as the shift to online shopping continues, and the value of sales increases, so too does the cost to retailers of returned goods. How, then, do retailers address this escalating, expensive and poorly understood problem? The answer lies in data, and more specifically, in returns intelligence technology created by Clear Returns. All major retailers are collecting data on purchases and returns, but none is using this information to its maximum potential to analyse post-sales behaviour, largely because standard enterprise IT systems and web analytics do not allow it. With an emphasis on sales and the lack of effective returns prediction, the problem often goes unnoticed until it s too late to take any corrective action to prevent or offset losses. Clear Returns award-winning solution helps retailers optimise for profits. Its predictive technology pinpoints the many reasons for return that deplete ecommerce profits and, more importantly, triggers intelligent responses. This means that you, the retailer, and your ecommerce and technology partners can take appropriate action to drive your overall profitability. Unraveling the reasons for return The ability to predict and prevent potential returns gives retailers like you the power to improve the customer experience, minimise returns and losses, and therefore optimise your profits. This power comes from understanding the many reasons for which customers return products. The top reasons for online returns, revealed by Clear Returns technology, are as follows: Mismatched customer expectations - without the ability to touch, feel and try items online before purchase, customers are often

2 dissatisfied when they receive the product; this is usually because the retailer has not presented them well or accurately enough online, they don't fit, or because the customer s expectations were simply not realistic. No staff intervention - sales staff in traditional brick-and-mortar stores are generally very effective at managing the customer experience and converting returns into exchanges in-store. Conversely, online retail environments present no opportunity for both shopper and retailer to fully interact. Problem products Clear Returns has identified that the top 10% of problem products are responsible for between 40-50% of total returns costs, and as customers come into contact with these items it may permanently damage your relationship with them. Spotting these toxic products after as few returns as possible is key. Poor customer experience - the first-time buyer is a particularly fragile prospect in ecommerce, with up to 25% of returns caused when this group of customers is unhappy with the product or experience they received from a new online retailer, resulting in a return. These failed customer service opportunities account for up to 15% of the total cost to serve. Dysfunctional shoppers - certain groups of customers respond to the challenges and incentives of the online shopping environment with buying and returning patterns which can be characterised as dysfunctional shopping, as it generates costly returns for the retailer, and inconveniences the customer. Some of these shoppers are 'overbuyers' who like to bring the store to them to assess items more carefully, as they would in a brick-and-mortar shop. Others experience choice overload and make impulse purchases which they later return. makes it all too easy for customers to return products, encouraging impulse buying, dysfunctional shopping behaviours and even fraudulent purchases. Use and return fraud - research by the Clear Returns team has found that although use-and-return shoppers are typically 1% or less of the consumer population, they can be responsible for up to 10% of the cost of returns. Each of these shoppers costs the retailer an average of 1300 annually, although some individuals can cost up to Counting up the cost of returns Calculating the real cost to the retailer of returned products is actually quite complex. Returns impact on your revenues in a number of different ways, some of which aren t immediately obvious and therefore not always taken into account, making it difficult for you to present a true statement of profit (or loss) for any given period. Disruption of working capital Even though much revenue lost to returns can hypothetically be reclaimed via resale, issuing refunds means removing working capital from the business. Often this also means incurring fees as the money is moved. Product depreciation Every time a product is returned, its resale value is significantly decreased. This is because of the wear incurred in the process of repeated shipping and by preparing the product for resale. In cases where the customer returned the item immediately, the item loses a percentage of its value during each return. In cases where the item was used and returned by a fraudulent shopper, the depreciation can be much higher, sometimes to the point of rendering the item unfit for resale. Incentivised online returns policies - many retailers offer free returns online, which

3 Discounting and margin loss As a result of product depreciation incurred during the returns process, products which have been returned are frequently discounted to encourage resale. Alternatively, returns which are not ready for resale by the time the initial sales period ends will end up on the virtual discount rack. This, combined with the cost to serve described below, does not just wipe out your profit margins but can actually cause a net loss. Dealing with returns is where retailers are going to lose margin...they're all investing a lot of money but are in catch-up mode Kate Calvert, Cantor Fitzgerald certain items are returned multiple times. This may even lead to further costs of stock disposal. Opportunity Cost As well as the physical costs, it is also important to be aware of the opportunity cost that is incurred with returns. As stock sits out of your systems and in the hands of use-andreturn customers this leaves loyal, high-value customers facing the frustration of an 'out-ofstock' message. Unhappy first-time customers typically account for 20% - 50% of returns, but as well as the current return costs you may also be jeopardising future lifetime value from this group when you fail to meet their needs. Cost to return The most obvious cost associated with a return is the cost of shipping the item from the customer back to the distribution centre. Research shows that 75% of retailers absorb the cost of shipping for returns, with many also offering free outgoing deliveries. This means that you absorb the majority of the monetary cost of return shipping. Free returns also mean the customer incurs no additional cost for buying and returning multiple items, incentivising expensive dysfunctional behaviour. The second set of costs is incurred in the process of preparing items for resale. The refund must be processed, and then the item must be cleaned, repackaged, and returned to the warehouse. Besides the cost of cleaning and packaging materials, these tasks also require staff time. Although the amount of time required to process an individual return is relatively small, the cumulative impact of processing large numbers of returns is high, particularly when The solution If these issues sound all-too-familiar, then the time has come for you to face them head-on, before the wave of increased online returns becomes a tsunami and the devastation to your profit margins is too great to bring under control. Clear Returns award-winning predictive intelligence technology will help you tackle the growing problem of online returns. While many retailers focus on optimising for sales, our products will help your business optimise for profit, and break down the issues into manageable chunks that can be dealt with in a timely and cost-effective manner. The technology can identify the products, processes, customers and content causing

4 you costly returns and deliver this critical information to you in the format you choose. Problems are apparent in days, not months, meaning cost saving action can be taken fast. By enhancing your internal systems and insight capacity, Clear Returns can help you make better informed decisions faster, create value earlier and grow customer s lifetime value as well as help you decrease your costs so you can save more and sell more without having to further increase expensive headcount. The evidence Customer experience and operational efficiencies are essential to the profitability of the online channel and tackling returns are key to both. We re working with Clear Returns as it fits our innovative approach to ensuring that we deliver quality and service to our customers at an affordable price. Nichola Toner, Website & Customer Services Controller, M&Co The benefits to your company of working with Clear Returns will be an improved bottom line. Clear Returns' work to-date with retailers has already quantified the following: One high street retailer lost 3.6 million annually due to returns caused by faulty sizing/construction issues, compared with only 750,000 of damaged products Another lost 5 million annually due to returns caused by a mismatch between content and customer expectation One retailer lost 2.7 million in one year due to dissatisfied, first-time customers not repeat purchasing from them Identifying and quantifying the value of lost profits caused by online returns is just the first part of the process. Clear Returns will also enable you to take appropriate, timely action to reduce the scale of the problem and even turn negative post-sale online behaviour into an opportunity to upsell. How Clear Returns can help you We typically deliver non-grocery retailers at least 1 million of additional retained revenue for every 10 million in refunds. How? Clear Returns' award-winning returns intelligence platform consolidates data from across a retailers' business and the wider market, then applies risk scoring, proprietary algorithms and complex predictions. We take complicated returns data and make it visible to retailers, which helps them take proactive and preventative action on their returns. We provide:

5 Specialist Insight - Clear Returns benchmarks returns data across product categories, retailers, brands and geographies. We know what normal should look like, so we can alert to anomalies faster than BI teams Predictive and fast alerting - Unlike internal management information, Clear Returns focuses on the future and things you can actually act on. We provide predictive alerts, so retailers can take immediate action, stopping issues from escalating and preventing returns before they happen Finding out the 'why?' - Whether it's customer or product behaviour or the result of your marketing activity, Clear Returns gives quick and accurate insight into the causes of returns and we recommend what is best to do next for the biggest business impact Platform independence - There's no need to change PoS, ecommerce or analytics platforms. Clear Returns integrates with any system and sets itself up in four to eight weeks, so that we can provide predictive intelligence on returns faster than anyone else Time to take action The numbers speak for themselves and as the value of online sales continues to increase internationally, so too does the cost of returns and damage to your bottom line. Clear Returns' predictive technology has already saved retailers millions and it can do the same for you. Winners of: Tech All Stars EU named top tech startup in Europe 2014 ecommerce Innovation of 2014 Best New Product 2013 IBM SmartCamp 2012 Get in touch to find out more now info@clearreturns.com, phone + 44 (0) or visit About Clear Returns Through sophisticated data analysis and a combination of product and customer modelling, Clear Returns identify the causes of returns and, more significantly, the customers most impacted. This helps retailers minimise the negative impact of returns on the business and their customers, without hiring an expensive data science team. Clear Returns works with ecommerce, multichannel, store, home delivery and TV shopping retailers worldwide, and with manufacturers and supply chain partners. Find out more:

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