The peak return season doesn’t have to shrink your margins or create logistical headaches. With the right strategies, you can transform returns from a hassle into an opportunity. Seasonal spikes bring unique challenges that demand tailored solutions, particularly during the holidays when returns often surge. It’s time to take a fresh look at your returns process to cut unnecessary costs, and even use those returns to your advantage.
Why returns management matters
Returns are an inevitable part of fashion e-commerce, but they don’t have to derail your operations. Their impact is amplified during peak seasons – straining logistics, eating into profits and challenging sustainability goals. Managing returns efficiently isn’t just a nice-to-have; it’s a game-changer for keeping your business on track.
Key drivers behind high return rates
Every return tells a story, and the ending isn’t always a happy one. From size mishaps to unmet expectations, understanding the main reasons behind returns is key to keeping them under control. Let’s decode the top reasons causing those dreaded trips back to the warehouse:
Size: A game of too big or too small
According to Zalando research, nearly 1/3 of returns are caused by sizing issues – either “too snug” or “too loose.” Customers are hunting for ‘just right’, and when they don’t find it, back the item goes. Luckily, there are some major size & fit developments going on in the industry to help people find the right fit.Taste troubles: Not what they imagined
With a large fraction of returns, the problem boils down to taste. The item didn’t look as good in person, the quality wasn’t worth the price or it simply didn’t live up to expectations. It’s not them… it’s the product.Other logistical woes
The remaining reasons are a mixed bag – wrong items sent, defects or delivery delays. Each misstep chips away at customer trust and adds to return rates.The role of presentation, timing and culture
Sometimes it’s not just the product, but the way it’s presented. Poor images, unclear descriptions or incorrect size charts can set customers up for disappointment. Cultural differences and shopping habits often dictate return patterns, highlighting the importance of tailored strategies for different regions.
Strategies for reducing returns
Reducing return rates isn’t just wishful thinking – it’s a science. By understanding what’s going wrong and taking action, you can drive more sales with fewer items coming back. This could make a huge difference during peak return periods when operational efficiency is put to the test. Here’s how to tackle the return problem head-on.
Step 1: Review return reasons
Start by looking at the return data for your most problematic items. Why are they coming back? This is one of the most crucial insights for optimising your operations, alongside meeting other key European convenience expectations. If customers consistently cite sizing or quality issues, you’ve found your starting point. Carefully review return forms, comments and customer reviews, as they’re a goldmine of insights.
Step 2: Resolve the return issues
Once you know what’s broken, it’s time to fix it.
Update size charts with accurate measurements. Include details like model height and size. Zalando’s pilot study reduced returns by 2.2% just by doing this.
Improve product imagery 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% on product pages by updating model photos for the applicable assortment.
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 are game-changers for matching customers with the right fit.
Step 3: Evaluate the costs vs. the gains
Not every product is worth the effort. Analyse whether the return-prone items are profitable enough to keep selling. Profitable item? Re-list the item and monitor performance. Non-profitable item? Consider discontinuing it and focusing on better-performing products.
Turning returns into a profitability driver
Returns don’t need to remain a cost centre. In fact, they can become an opportunity to optimise your business, boost margins and even enhance customer loyalty. It’s all about shifting your perspective and making strategic adjustments.
Insights from clustering analysis
Not all markets or categories are created equally when it comes to returns. By analysing your Net Merchandise Value (NMV) and return rates, you can strategically optimise your country and commodity mix. Splitting your markets into four clusters based on turnover and returns helps identify actionable opportunities for growth and efficiency, based on research conducted by Zalando:
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 toward improving your market and commodity share.
Leveraging returns for strategic gains
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.
Returns don’t have to be a drain on your business – they can be a strategic advantage. By understanding the drivers behind returns and taking targeted action, you can reduce costs, optimise processes and even enhance customer loyalty. It’s time to rethink returns because the right approach doesn’t just reduce losses; it drives your business forward.
