How much will size-related returns cost you this holidays season?

How much do returns actually cost your online-shop? Transportation costs, loss of revenue, inability to sell items after they're returns – that's only a tip of an iceberg

How much will size-related returns cost you this holidays season?

It’s holiday season again, and with online sales increasing 20% this year, that only means one thing: popular holiday sales bring back the nightmare of e-commerce returns.

Setting up and delivering a great holiday sale is great, but having it contradicted by a swell of returns after the fact brings your success level down — and your expenses up. An estimated $19.4 billion of goods purchased online between November and December are expected to be returned this year — more than 30% of all projected e-commerce sales, and an 8% increase compared to last year.

This can add up: 80% of retailers are offering free shipping on returns over the holidays, costing about $5 to $7 per item returned. There’s also the cost of processing a return — “about $5 in credit card fees and labor costs to prepare an item for resale, such as ironing, folding, and repackaging”.

Sounds discouraging, but ask yourself this key question: Are your returns, in fact, preventable?

One major issue is fit, with fit-related problems blamed for 57% of returns, despite the focus on accurate product portrayal and the additions of size charts, product descriptions, and customer reviews.

This is partly due to the increase of gift-buying over the holidays, so customers must ‘guess’ sizing and fit for presents for their friends and family members. We speculate that the high variability of size between retailers also adds to customer confusion around sizing when purchasing online.

Figure 1 — Purchases and returns increase over the holiday period.

To test this hypothesis, we analyzed orders from about 200,000 users and across 549 different brands, over a period of 7 months from August 2015 up to July 2016. When we looked at the total number of purchases, we observed that there is, of course, an increase in purchases during the holiday season, seen in Figure 1. In Figure 2, you can see that, surprisingly, the increased number of orders are followed by a decrease in the different number of purchased brands when compared to the ones purchased during the holiday season, meaning that during the holiday season, customers tend to purchase from a smaller set of brands.

These brands could simply be dominating the market in terms of selection of products, or that they are offering the biggest or most popular sales. Either way, it’s clear that customers tend to explore a lower number of brands during their holiday shopping than they would otherwise.

Fig. 2 — The number of distinct purchased brands drops during holiday season.

If this holidays season you expect to reach orders, and your average basket size is $ with a returns rate of %…

4500 of orders will be returned and you will loose $15750 on returns costs.

With EasySize you can prevent 1339 returns and save $13388.

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What’s also interesting is that we found that customers tend to purchase a larger selection of sizes than they normally would during popular holiday sales, due to the steep discounts, thereby increasing the amount of returns. Figure 3 shows the number of unique sizes purchased for each brand over two week intervals, compared to the average number of unique sizes purchased over the entire period. To have an objective baseline, we normalized the number of returns from each brand in the same way.

You can see that the variability of the purchased sizes increases from mid-November, drops after Christmas, but then spikes again around mid-February, probably due to end of season sales. Accordingly, the number of returns increases from mid-November until Christmas, and then returns to a steady rate after Boxing Day.

Figure 3 — The amount of sizes purchased increases during the holiday season.

As purchases increase, the number of purchased sizes increases, and this aspect of ‘guess-timation’ can’t be entirely avoided, retailers are offering a smoother return process. But what about items that aren’t gifts? And what if your customers are buying for people they know well?

One simple solution to ensure that your customers are satisfied and getting exactly what they want is to add a sizing solution to your webshop, like EasySize.

EasySize finds a customer’s best fit in seconds using existing data, without the need for physical, or clothes measurements. For new customers without a shopping history, it predicts the best fit based on the customer’s sizing with other brands — that they already know or have in their closets.

Mitigate the mass of returns heading your way this year, and calculate how much you can save by applying EasySize to your webshop today!