The start of the new year can signal a host of obstacles for those in the ecommerce business. According to our data, online retailers see a 36% drop in revenue from the dizzying heights of the festive season, with this figure sinking even further during February, when revenue sits at 14% less than the yearly average. Of course there are multiple factors behind any revenue drop, which means there is no silver bullet. Instead you need a strategy that addresses each issue in turn – ideally implemented before the new year arrives.

 

With over 20,000 merchants using Nosto we have access to a great deal of insight on the working of the average ecommerce store. So, we spoke to a number of our clients about the challenges they face during Q1. What we found was that, despite vertical specific issues, many ecommerce merchants face the same problems. Turning to our in-house Ecommerce Specialists we have strived to create a multi-faceted strategy to tackle these. In this, our lates blog series, you will find an exploration of the issues raised, tried and tested recommendations to deal with them and reallife examples of the solutions in practice.

Here’s to turning adversity into opportunity.

 

SEASONAL REVENUE TRENDS ACCORDING TO NOSTO’S OWN DATA
Nov 2015 saw over 20% more revenue than the yearly average. We see this peak in Dec 2015 with almost 25% more revenue than average. Revenue then drops sharply in January, reaching an all-time low in Feb 2016, which saw almost 15% less revenue than average.

 

Combat high returns by filtering recommendations and providing excellent customer support

 

The problem:

The beginning of the year is a unique time when it comes to returns. With seasonal sales driven predominantly by the purchasing of gifts, more items than average are found to be not quite the right fit. While it may cause domestic issues on the big day itself, the repercussions for merchants can be a lot bigger; not only does it take a big chunk out of the profit you thought you had made but you are also making a further loss due to the cost of postage and packaging (particularly if you offered free packaging originally). Although return rates differ from vertical to vertical analysts say the average is anywhere between 25% and 50%, and with this set to rise swiftly after the holidaythe number becomes worryingly high.

 

As little as 7% of products could be driving 50% of returns.

 

The solutions:

Identify troublesome products in advance 

One of the first tactics to fighting returns is to stop them occurring in the first place. In fact, research has shown that reducing returns by 1% increases net profit by 1%. To do this use data analysis to identify your ‘toxic items’- those pieces which drive the highest amount of returns. Research has found that as little as 7% of products could be driving up to 50% of returns. This is particularly dangerous when these items have been to shown to have a domino effect, their inclusion in an order making it more likely that the whole order will be returned. In a recent article by Ecommerce Week it was revealed that M&Co announced £415,000 worth of savings after identifying the top 10% of frequently returned items, then going on to remove them from active promotion. At Nosto, we have a Blacklist feature which enables retailers to automatically prevent certain items from being included in product recommendations. If you do your recommendations manually make sure to give these items lower precedence, and when configuring the layout of your store, if your items are not filtered by attributes such as price, put them lower down in the listings.

Give your customers as much information as possible

The more informed your shoppers are on exactly what they’re buying, the less likely they are to make a purchase that they will regret and then return. Make sure you give as much information as possible in the product description, as well having clear and detailed product photos. But also consider going one step further and enabling customer generated reviews, this will allow shoppers to discuss issues that may normally drive returns, as well as giving you insight into the type of information they want to know about your products.

Our client, Country Dreams does a great job of this with multiple detailed photos for each product.

 

Bonus tip

A key issue in the fashion industry is inconsistent or unusual product sizing. Reviews will help this to some extent, as will stating the models height and size worn. But for a more extensive solution consider using technology such as Virtusize, which tells shoppers the exact dimensions of the clothes and allows them to compare the fit to previously purchased items. Make the process as smooth as possible to encourage shoppers – rather than items – to return.

For those items you do (inevitably) encounter returns on, concentrate your efforts on how you manage that interaction. Although returns are a pain they can also be an indication of a serial shopper – Zappos have previously been quoted as saying that their most frequent returners (with a 50% return rate) are also some of their best customers. Not a group you want to treat badly. This starts before the item is sent back by making sure your returns policy is both clear to see and clear to understand. You should also offer a fair timeframe for them to return the item and either free or reasonably price postage. And if you’re a multichannel retailer make sure to allow people to return items to local stores if that is their preference.

 

Paul Evans have a very concise and very fair returns policy, positioned clearly on the page.

 

Your most frequent returners might also be your best customers

 

Want to go one step further?

Consider reaching out to people who have made a return, encouraging them to buy again with personalized recommendations. If they had a good experience when returning the initial purchase then there should be nothing to stop them purchasing again.

 

For more tips to help you prepare for Q1 come back next week when I will be tackling the issue of excess stock! Or, alternatively, you can download our handy Q1 checklist for all the tips in one go!