How retailers can prevent January returns from blocking growth

On the face of it Christmas looks like a dream come true for businesses looking to encourage investment through demonstrating increased revenue. Burgeoning sales from as early as October grow into a crescendo in what’s become commonly known as Manic Monday – the second Monday in December.

With Britain increasingly adopting the US trend of Black Friday at the end of November, another bumper payday for retailers across the country also appeared to be within reach last year – admittedly at significantly discounted prices.

John Lewis, often used as a barometer of both high street and online sales, reported a 41% increase in sales of electrical goods in Black Friday week. But managing director Andy Street has warned retailers that this may not be a sustainable model for sales, warning of logistical challenges.

“It is all very well making sales on Black Friday but you have got to be able to deliver and fulfil them,” he warned.

Operational concerns around sales are a big issue for retailers both before and after Christmas. For all the huge income generated every year – YouGov figures released in December put the UK’s festive spending at an estimated £22.5 billion – January returns are very much the elephant in the room.

Although too early to measure the impact of this year’s returns, for Christmas 2013 the estimated impact of returns was given at around £200 million. Remarkably, this is even before the post-Christmas period when the real pain begins.

So with such vast amounts at stake, it’s clear that returns can cause both online and high-street vendors a serious headache – at a time of year when staff and resources are already stretched to breaking point.

E-commerce online support company Core Fulfilment co-director Jeremy Vernon knows a lot about helping brands through these treacherous waters. The company has worked with all level of customers from start-ups to household names such as Disney and Guinness. It is committed to help companies as they grow their online presence.

He told Growth Business that while the challenges faced vary for business to business, the common denominator is time – which means more staffing hours and ultimately more money. 

“Many retailers can find themselves buckling under the strain of returns in January simply due to a lack of staffing,” he warns. “Although most take it for granted that staffing is vital in the run up to Christmas, it can be easy to forget that extra staff may be needed afterwards.

“It’s important that retailers spend time forecasting and making predictions for the number of staff that might be required in January to handle and process returns.”

Vernon also highlights return policies as something companies should put in place long before the Christmas rush hits. Failure to do so – especially for mid-market retailers – can mean an already fatigued workforce spending valuable time dealing with complex queries from frustrated customers.

Another big challenge for the smaller retailers is how to manage the cost of returns. This is one area where they are at severe disadvantage when compared to the larger traders.

“Larger retailers are prepared to absorb the costs through the fulfilment process from delivery all the way to returns,” Vernon explains. “For smaller retailers, it’s important to be realistic about how much they can contribute towards this cost.

“It might not actually be possible to offer a free returns policy, for instance, in which case it’s imperative that this is made clear at the point of purchase… There are other things [smaller companies] can do to assist them in the returns process and make their experience easier, such as providing a straightforward returns form with the delivery procedure explaining what they need to do.”

One area that suffers from a high level of returns all year round, but especially Christmas, is online fashion. People buying clothes have a hard enough time working out if they will fit them, let alone others.

But online retail support company Virtusize is hoping to help fashion vendors to minimise this impact at the busiest time of year. Co-founder and head of growth Peder Stubert told Growth Business it’s easy to underestimate the impact of January returns.

“If you get a return the costs are a lot higher than people realise,” he says. “You have double shipping costs, double handling costs and double credit card costs. And you will also have to put that item back on sale, potentially decreasing its value. A return will typically cost around £20 – regardless of the value of the item.”

Stubert believes that helping customers to understand “size and fit” is the best thing online fashion traders can do to bring the high number of returns down to manageable levels.

“Size and fit are responsible for about 50% of returns,” he says. “Personally I have brought items of clothing from different vendors that range from small to extra large. So it’s very difficult to know what size they are when buying items online. One way to avoid this is to allow customers to compare sizes with previous purchases by actual dimensions and not just pre-determined sizes specific to each vendor.”

It’s clear that the impact of January returns can hit mid-market retailers hard – both financially and in terms of resource. The consensus is that planning ahead, clear policies and being realistic about costs are key to ensuring it doesn’t become a serious stumbling block for companies looking to expand in the new year. 

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