Turn challenges into opportunities for your business
Returns are unavoidable in fashion e-commerce, but they don’t have to lower the profitability of your business operations. With the right insights and strategies, you can transform your clothing returns process – turning it from being a hassle into an opportunity. Before the peak shopping times when returns spike, now is the time to take a new look at your returns process to reduce unnecessary costs and even use those returns to your advantage.
Discover our strategies to streamline your returns process
Take a systematic approach to lowering your return rates. By understanding what’s going wrong and taking action, you can drive sales while ensuring that fewer items are returned. Here are three clear steps for leaving nothing to chance.
Step 1: Review reasons for returns
Start by looking at the return data for your most problematic items. Why are they coming back? Let’s take a look at the main reasons causing returns:
- Size and fit: According to Zalando research, nearly half of all apparel returns are caused by sizing issues. If the fit is not “just right”, the item is returned. Find out more about the industry’s size and fit developments being made to help consumers in the Zalando episode “Business Casual” with Stacia Carr, VP Fashion Customer Experience at Zalando.
- Taste and style: A large share of returns is because the item didn’t look as good in person or it simply didn’t live up to expectations.
- Logistical issues: These include wrong items sent, defects or delivery delays – each of which eats away at customer trust and adds to return rates.
- Presentation: Poor images, unclear descriptions, or incorrect size charts can lead to customers being disappointed.
- Cultural differences:European convenience expectations often dictate return patterns, highlighting the importance of tailored strategies.
If customers consistently cite sizing or quality issues, these are your starting point. Carefully review returns forms, comments and customer reviews to gain a wealth of insights.
Step 2: Resolve the returns issues
Now that you know what the issue or issues are, it’s time to make a change. This could include the following:
- Update size charts with accurate measurements. Include details like model height and size – a pilot study from Zalando showed a 2.2% reduction in returns thanks to this simple change.
- Improve product images with high-quality photos, close-ups and detailed shots of materials. According to Zalando’s research, returns can be reduced by up to 8.5% by improving model photos.
- Refine descriptions to highlight key attributes like fit, fabric and colour accuracy.
- Use technology tools to enhance the process. Virtual fitting rooms and size recommendation tools help customers find the right fit.
Step 3: Compare the costs to the gains
Not every product is worth the effort. If some items are more prone to being returned than others, analyse whether these items are profitable enough to keep selling. If the item is profitable, re-list it and continue to monitor its performance. If it isn’t profitable, consider discontinuing it and focusing on better-performing products.
Insights for international sales
Not all markets or categories are created equal when it comes to returns. By analysing your Net Merchandise Value (NMV) and return rates, you can strategically optimise your country and commodity mix.
Split your markets into four clusters based on turnover and returns to identify actionable opportunities for growth and efficiency.
- Cluster A: High NMV, high returns
Focus on top-performing but high-return items. Reduce dependency on high-return categories and assess the profitability of each SKU. - Cluster B: Low NMV, high returns
Evaluate which commodities are worth keeping and disinvest in low-performing ones. - Cluster C: Low NMV, low returns
Invest in markets with lower return rates and steer your assortment toward more profitable, low-return categories. - Cluster D: High NMV, low returns
Focus on scaling high-performing, low-return products. Optimise availability, refine marketing and use these items as flagship products or in bundles to increase profitability and strengthen customer loyalty.
To optimise your internationalisation strategy, it’s essential to understand the interplay between your pricing mix and the cultural behaviours of your customers. Local culture and buying patterns can significantly influence return rates, while sales event participation impacts both turnover and return dynamics. Recognising that some categories naturally have higher return rates allows for better planning and risk diversification across markets.
Leveraging return rate analyses from previous seasons, incorporating these insights into your buying plan and focusing on efficient SKUs for stock management are important steps towards improving your market and commodity share.
Convenience as a factor in fewer returns
The returns process itself plays an important role in the overall e-commerce experience for customers. If a customer makes a return, they may be disappointed and not come back to your e-commerce shop. But if the returns process is convenient, the customer may see this as an important factor and continue to visit your shop to make purchases. Once there, the customer will see the improvements you’ve made in model images, sizing, details, etc. Offering a convenient returns process ultimately impacts your long-term profitability.
Turning returns into a profitability driver
Efficient returns management isn’t just about reducing losses – it’s about improving your overall business model. Here’s how:
- Improve brand perception: A seamless return process makes customers more likely to shop with you again.
- Optimise inventory: Use returns to rebalance stock across channels and markets, ensuring that every product is in the right place at the right time. Operating one single stock pool can be a solution in these situations.
- Tap into secondary markets: Off-price channels like Lounge by Zalando, Zalando Outlets or other resale platforms need to be taken into account to recover value from returned items.
Why returns management matters
Managing returns efficiently isn’t just a nice-to-have – it’s a game-changer for keeping your business on track and profitable.
The logistics costs associated with e-commerce returns are enormous. Fashion items with a return rate of 70% will need to be shipped and returned three times just so that you can profit from one item sold.
On top of this are the storage and personnel costs, since the item will need to be washed, ironed and potentially refurbished before bringing it back to market. Space in the warehouse is then also needed for this.
Not to forget the ecological footprint of returns. The environmental cost of transport, packaging and use of natural resources, to name just a few, lower the sustainability of your business, potentially keeping customers away.
Be prepared for peak shopping times
Returns don’t have to lower the profitability of your business – they can be a strategic advantage instead. By understanding the drivers behind returns and taking targeted action, you can reduce costs, optimise processes and even enhance customer loyalty. It’s all about shifting your perspective and making strategic adjustments. Now is the time, before the year’s peak shopping times, to rethink returns – after all, the right approach doesn’t just reduce losses; it also drives your business forward.
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