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Innovation

Insights: Konrad Kelling

21 November 2018

 

Konrad Kelling is Managing Director, Customer Solutions at Barclaycard Payment Solutions. He explains why UK shoppers return £7 billion worth of purchases every year – and how UK retailers are responding to this ‘phantom economy’, with Barclays’ support. 

At Barclaycard, we process nearly half of the nation’s credit and debit card transactions. With this much data to deal with, you often get an early sense of emerging consumer trends. The continued success of online and mobile retailing is clear for all to see, but we’re also noticing more nuanced changes in consumer behaviour. These insights allow us to help retailers – our clients – stay a step ahead.

We first talked about the emergence of what we call ‘serial returners’ back in 2016. This is the trend of buying goods online only to take advantage of the free returns policy and get a refund. Many of us prefer to order online from the comfort of our living room. We can order multiple sizes or colours, see which looks best and then send back anything we don’t like. The consumer has never had as much choice, but this trend of ‘nearly selling’ is having a big impact on retailers. Our recent research found that UK shoppers are returning £7 billion-worth of purchases every year, leading to a ‘phantom economy’ of lost revenue for retailers.

Fashion first

It’s a phenomenon that’s particularly prominent in fashion retail. At first, free returns were a neat way to offer reassurance to the consumer, given that online shopping does not allow them to physically inspect the goods before buying. But the average Brit now spends £313 on online clothes shopping each year, sending back £146-worth – 47% of what they buy.

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We’re seeing a whole new consumer culture evolve – from simply returning unwanted items, to a phenomenon we’ve called ‘snap and send back’. Our research found that almost 10% of consumers buy clothes simply to post a picture of them on social media before returning them. Then there’s the ‘try before you buy’ option, which allows consumers to order clothes online and only buy them if they decide to keep them. More than three in 10 shoppers say they’re more likely to return items they order in this way, because they don’t have to pay for them upfront.  

Shoppers are now able to interact with brands through the purchase, have the physical experience of trying the clothes on and play a part in the fashion ecosystem by posting on social media, all without paying a penny. In short, it’s a wonderful time to be a consumer, but it’s a real challenge for businesses.

If the size fits

Retailers have a number of options in terms of how to respond. We know from our research that inconsistent sizing is the main reason for the high return rate when it comes to fashion. A third of shoppers say they buy clothes online expecting that items will be unsuitable before they’ve even tried them on and two in five say they return clothing bought online because items don’t fit as they expect them to.

Almost 10% of consumers buy clothes simply to post a picture of them on social media before returning them

So the first approach would be to try to cut down the amount that people return by ensuring that shoppers know exactly what they’re going to get. There is a clear message here to retailers to either standardise sizes, explain sizing more clearly in online descriptions – or even offer some form of immersive experience where shoppers can virtually ‘try on’ items of clothing. Innovation and investment in tech can really improve the customer journey here.

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The challenge is that today’s busy shopper often buys on the move and doesn’t have time to look at specific sizing details. So the second approach is to simply accept the serial returners are here to stay and adapt accordingly. Many brands adopt this approach, with a just under a third of retailers saying they have increased the price of goods to cover the cost of managing and processing of returns, half either reducing or increasing the length of time consumers have to return items and a fifth hiring more staff to deal with returns.

Most retailers know they need to offer free returns, or consumers will go elsewhere. Their constant challenge is how to prevent the impact of this offer on their bottom line. Ensuring the payment process is a simple as possible can help retailers navigate this new landscape. Different retailers will want to adopt different strategies so having a payment gateway that is secure, effective and more importantly, provides flexibility, is key.

Using data to give insight is also crucial. We’re placing real emphasis on the way we’re able to deliver insight to our clients using their own data, to really get under the bonnet of their business to discover the pain points. Fundamentally, it’s about accepting that the retail landscape is changing at speed. Our clients understand that tech is changing and so are customer expectations. Our job is to help them understand those changes, adapt and grow their businesses.