According to a report from Credit Suisse, up to 40% of clothing and between 5% and 10% of electrical goods bought online are returned in January. Heikki Haldre, founder and chief executive of virtual fitting room provider Fits.me, argues that returns are only part of a bigger issue: the increasing complexity of calculating the profitability of different retail channels including the internet, high street stores and mobile phones.
If the returns rate for clothing in January is really only 40% then I think most retailers would breathe a sigh of relief – anecdotally I have heard of rates approaching 70% in January as unwanted or incorrect Christmas gifts and spontaneous purchases made during post-Christmas Sales are returned.
Irrespective of how return rates are reported or accounted for, or whether they are 40% or 70%, such levels must be crippling for retailers – just the impact on cash flow must be painful.
The clothing sector has seen the proportion of sales made online rise from 10% in 2010 to 12% in 2011, and it may easily have exceeded 15% in 2012 – this is perfectly plausible since research shows that more than half of retailers say their online sales are growing at 25% or more.
But since return rates for clothing sold online is predictably higher than for items sold in-store, it’s inevitable that returns as a proportion of overall sales will increase, and – if it’s not already – it will quickly become a problem for those retailers that find themselves doing more and more of their business online.
By Heikki Haldre
Founder and chief executive
Fits.me