New study shows
A new report released today highlights the hidden dangers of online companies such as ASOS, Topman and schuh introducing try-now-pay-later options for customers. The trend is threatening to overwhelm retailers– many of which are already reaching crisis point – with a huge surge of intentional returns that may undermine profits.
Brightpearl’s study reveals the try-before-you-buy trend will have a major impact on both purchase behaviour and, of course, returns.
According to the report, the majority of consumers (76 per cent) would ‘definitely’ or ‘maybe’ purchase more items if offered a try-before-you-buy option, with shoppers ordering on average three extra items each month, only to return them without ever paying a penny.
Worryingly, 87 per cent would return up to seven purchases – with research showing that 85 per cent of consumers expect retailers to provide returns for free.
The report also reveals that more than 40 per cent of retailers have seen a marked increase in ‘intentional returns’ over the past twelve months, when customers deliberately over-order multiple items knowing returns are free or cheap.
Furthermore, more than half (51 per cent) agreed that their margins are being strongly impacted by the process of handling and packaging returns and 72 per cent believe they will be squeezed even further as the try-before-you-buy trend intensifies (explanation of trend below).
The survey reveals that 17 per cent of global retailers have already adopted the try-before-you-buy model. By 2019, more than a quarter will offer this type of service to customers.
Revealingly, the study finds that a staggering 69 per cent of retailers are not deploying any technology solutions to process returns. This is despite the complexity of managing returns, with the average returned purchase passing through seven people before it’s listed for resale.
With returns already costing UK retailers £60bn a year, the study finds that for many retailers this trend will result in a surge of returns, with customers returning on average three items a month, and at least triple the cost of returns if they continue to take no action.
High growth and medium-sized businesses will be the most exposed, with 70 per cent worried that try-before-you-buy services will affect their profitability.
Derek O’Carroll, CEO of Brightpearl said: “For consumers, try-before-you-buy is a positive trend, removing another barrier to purchase.
“The good news for retailers is that this will almost certainly lead to an uplift in sales. Our study indicates that shoppers want the option to order items such as clothes online but only pay once they decide to keep them, so it’s something that all retailers will need to consider to remain competitive.
“However, this trend could spell disaster for retail business owners if they do not prepare by having the right framework and solutions in place to manage returns. And, they’ll need to do so quickly as the trend becomes more widely adopted over the next year.