Online retailers go hi-tech to size up shoppers and cut returns
BERLIN (Reuters) - Online retailers are trying to cajole consumers into revealing their vital statistics with new sizing technology tailored to turn back a tide of returned garments that is hurting profits.
Up to half of the clothes bought online are sent back, many due to poor fit, squeezing retailers' margins and creating logistical problems in recovering and re-selling rejected stock.
Clothing is the most popular online shopping category in most of Europe: 45 percent of Brits and 41 percent of German consumers bought online in the last year, Mintel research shows. Germany's Zalando and Britain's ASOS, online-only fashion retailers, grabbed market share by promising a free returns service - that now threatens to undermine long-term profits.
ASOS Chief Executive Nick Robertson said a 1 percent fall in returns would immediately add 10 million pounds ($16 million)to the company's bottom line. ASOS reported attributable net income of 32.9 million pounds for the year to August 31, 2012.
It's not a problem that can simply be solved by charging for returns, retailers say. Businesses would still find it tough to recoup the cost of extra shipping and warehouse fees, damaged goods and difficulty in selling items that may no longer be season-specific - not to mention the intangible impact of unhappy customers.
"If you don't have to return something then clearly that is a better experience than having to return something," Robertson told Reuters, adding the average ASOS returns rate is about 30 percent, taking into account variations between markets.
E-commerce still only accounts for 15 percent of total garment sales. Much of the lag is down to shoppers' reluctance to buy clothes they can't try on. Fits.me, a London-based developer of sizing software, estimates that around 80 percent of all clothes bought in-store pass through a fitting room.
Fits.me is one of several start-ups to have recently sprung up in response to the industry problem, producing software they claim will reduce returns and boost sales by helping shoppers select the correct tailoring.
Fits.me, whose technology allows customers of brands including Adidas and Hugo Boss to visualize clothes on different body shapes, polled German online shoppers and found 35 percent of them aborted potential purchases because of concerns about fit.
"There is no size standardization. The risk of buying online is very high," said founder Heikki Haldre, noting that only a third of people sized medium will actually choose an "M".
Retailers are reluctant to go into too much detail about how they are trying to reduce returns. But the experience of several start-ups suggests consumers are put off by requests for too many measurements, seen as a major inconvenience.
German mail-order giant Otto is working on new sizing software with several technology developers who have had to rework prototypes that asked shoppers for precise statistics.
"When people buy clothes online they want to do everything fast and quick. Most people don't want to do any work," said Asaf Moses, co-founder of Berlin-based UPCload, which had to abandon an approach using home web-cams to take body measurements. Only 15 percent of shoppers opted to use it.
UPCload came up instead with a "best guess" system in which shoppers enter their gender, weight, height and age, then choose the best match from three body shapes.
"Once we took this approach, sales just boomed," Moses said.
German consumers in particular are quick to return goods owing to the country's long-established mail order industry, with its free returns. Hard-to-fit trousers and shoes are the most regularly-returned items. So Otto is also working with Mifitto, a Duisberg-based firm, to find new ways of sizing.
"Customers don't want to get in front of a camera or measure themselves," confirmed Dominic Koehler, Mifitto co-founder. The company has an app for Otto.com which asks shoppers to upload a tracing of the outline of their foot, but says it sees the future in scanning the 3-D interior of shoe brands to recommend the right size and style to shoppers.
Otto, which has shifted its mail-order business online to become Europe's biggest player in e-commerce after Amazon, says its customers are curious about new fitting technology, although it declined to quantify the impact on returns.
Otto is also working with data analysis firm Blue Yonder, which has found that customers are less likely to return a garment the more online pictures they can see of it while ordering. It has also found companies can cut returns by making customers aware of the environmental impact - from transport to packaging - of ordering multiple sizes in the same item, a habit adopted by many shoppers who prefer to try several sizes at home before buying just one.
Other approaches include that taken by Virtusize, a Stockholm-based firm working with ASOS, which enables shoppers to compare the measurements of the item for sale with those of the clothes they already own.
"Measuring a garment is easier than measuring your body," said Peder Stubert, Virtusize co-founder. "We can lower size and fit specific returns by 50 percent and generally half of returns are due to size and fit."
Ultimately however, the impact of any new sizing technology may remain limited if a company makes it easy for consumers to change their minds about the clothes they have ordered.
Jefferies analyst David Reynolds believes that ASOS managed to lower return rates in the first half of the year by inspecting its products more closely prior to shipping to check customers were receiving the right sizes.
However Reynolds - who said himself that he regularly returns clothes ordered online - forecast those rates could rise again because the firm has made it so easy to send back goods.
"New technology for sizing could potentially make a real difference but the convenience of returns could defer the acceptance of sizing technology," he said.
(Additional reporting by James Davey in London; Editing by Sophie Walker)
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