Up to a third of products purchased through the internet are returned. These returns can be a considerable burden to retailers as they cost the profit margin of the product and reduce customer loyalty. Understanding a pattern of returns can therefore be of considerable benefit to firms. For such an understanding, Clear Returns is partnering with IBM and will use its Big Data & analytics technology to unlock the information in the cloud and improve retail and customer experience.
Clear Returns is a small firm started in 2012 at the Entrepreneurial Spark, an incubator based in Glasgow. The company has developed a set of analytic techniques that help companies identify waste in their returns supply chain, from identifying poorly worded product descriptions to tackling serial returners. Founder and CEO Vikey Brock, as part as the start-ups growth trajectory, has worked closely with IBM, taking part in its SmartCamp in Dublin.
As retailers become omni-channel operators, more and more consumers are buying their products through the internet and having their items sent home. This radically changes the shopping experience for retailers. “Today, the true point of sale isn’t the retailer’s website, it’s the customer’s home, where they decide whether they actually want the products they ordered,” explains Brock.
The effects of returns can be relatively negative on the business from which the clothes were sourced. According to Clear Returns, in some retail branches 80% of customers that undergo a return experience, do not shop at that retailer again, while 1% of serial returners come to drive 10% of total return costs. The most interesting aspect of the research is that it is a relatively small number of products (7%) that account for a large part (50%) of total returns.
According to Brock “retailers need to get much more intelligent about the way they handle returns, and we see predictive analytics as a key tool in providing that intelligence,” through which they can identify which products in the catalogue are at issue. As the rate of returns vary considerably per product and fashion line, problematic items can be identified and classified, which the Brock calls the ‘toxic products’.
To combat the phenomenon of unnecessary returns in a broader way, Clear Returns and IBM have partnered up. The two companies will leverage their wider software offerings, including IBM SPSS Modeler, IBM Digital Analytics, IBM Sterling Order Management, among others, to develop a software platform which analyses the data from the sales, order management, warehousing and in-store systems of retailers. Through careful analysis of the chain of events after an initial product order, the Clear Returns team will be able to develop tailor made advice to clients.
Besides identifying cases where improvements can be made to product lines to inhibit returns, the offering will also be able to analyse consumer behaviour to identify high value customers that both buy and keep what they buy, such that they can be specifically targeted with mail campaigns to drive profits.
Commenting on the partnership, Colin Linsky, Global Industry Executive for Retail at IBM, says: “Retail consumers have become more empowered and informed about the choices available to them. This can make it more difficult for retailers to accurately predict demand, optimise inventory and drive maximum profitability. We’re very excited to be working with Clear Returns to help retailers offer a more proactive and personal service - ensuring that returns don’t lead to customer churn.”