Returns vs. Revenue – A Battle of Perspective

During the Covid-19 pandemic, we’ve learned a great deal about doing business remotely, managing staff working from home, or adapting the workflow to the client’s needs. It was a challenging period for everyone, but you might think that the owners of e-commerce shops were the lucky ones. Online sales got a boost, and the prediction of revenue for the stores was as good as it could be. But there was a missing piece in this puzzle, one that not many have thought of, which was prone to change this apparent balance: the returns.

Research on return policies is scarce and inconclusive. Many papers focus on customers’ behavior in cyberspace and how the owners can profit from this to maximize their gains. The general thought regarding the indulgent policies applied by the stores is that it’s another bonus for the business, as it should reduce the consumer’s risk and increase demand. In addition, acceptable returns create a marketing incentive to attract loyal customers and promote a safe space for acquisitions, where you can change your mind at any time. 

Unfortunately, this is not necessarily true, as a problem arises instantly in one’s mind: yes, free returns will mean multiple orders, but it will also mean that clients will take advantage of it and buy carelessly.

Despite the cost and prevalence of returns, most merchants offer a return policy hoping that the positive effect on demand will offset the negative impact on returns. Free return policies will never benefit retailers in terms of long-term profitability. There is also the option of an indulgent return policy with a reduced cost. Loyal customers will generate a higher contribution per order in this case, as they will think twice before acquiring any item and will be more likely to keep it.

The decision to buy clothes is closely related to the feelings of individuals about themselves, their body image, and the image they want to project to others when they are wearing them. There is a new trend among customers: buying multiple sizes of the same item to keep only one. Combined with lenient return policies, this will have a significant impact, whether we are talking about a small store or a larger one. We can also understand the customer side, as shopping online gives them the luxury of time but not the luxury of trying things out. However, some research cited in The Economist suggests that the company’s profit would increase by 50% if it were not for the costs associated with returns.

We’ve seen the issues and the impact, both on clients and owners, but which would be the best way to conciliate them? Applications that guide the buyers to choose the right size for them are the innovation in the industry, which can make a difference for both parties.

Esenca EASY FIT is the best sizing tool available on the market. Easy to use – as the name suggests – and to manage using our innovative dashboard, it is the fastest instrument to find the right size in seconds. You only need to add your data once (meaning only the height and weight) and will sync it with all the items in the shop. This is a massive breakthrough for the apparel world and an excellent opportunity for shop owners to access a technology that was only a sweet dream just a few years ago.

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