ADVICE: Returns could cause jewellery retailers a Valentine’s break up
With spending from this Valentine’s Day anticipated to have exceeded £980m – £15m more than in 2015 – according to the latest figures from Verdict Retail, there’s no denying that the 14 February is a well-established retail ‘event’. For jewellery retailers it marks not only a peak trading period, but the first major sales surge in the calendar year.
However, as Cupid hangs up his bow and arrow for another 12 months, Valentine’s Day trading will continue to impact jewellery businesses in ways that they may not have accounted for in the months to come – and this is due to the issue of returns.
Returns are already a £60bn annual problem for the UK retail industry, with a third of these attributed to online purchases. Based on analysis of millions of items which have been returned and over 10 years of shopper insight, Clear Returns data suggests that one in four rings bought via distance selling, either online or through TV shopping channels, will be returned following Valentine’s Day. But why is this?
Firstly, the popularity of ecommerce has given rise to a new set of return drivers, as there is often an expectation gap between what the customer sees online and what they receive when the product arrives. In addition, the emotional euphoria of making a purchase has worn off by the time it has been delivered, leaving shoppers to make a more rational and dispassionate assessment of the item they have bought.
This ‘gap’ is only exacerbated further when there is an emotional attachment associated with the purchase, as we see in the case of Valentine’s Day, where the majority of purchasers are selecting a gift, maybe even an engagement ring, for a loved one.
Another common Valentine’s Day return driver is panic purchasing. As the 14 February fell on a Saturday this year, Barclaycard expected a third (36%) of shoppers to leave gift buying to the day itself. Although this removes the disappointment of ordering a product online that doesn’t live up to its reality, purchasing under time pressure in a store can often lead to snap judgements, which ultimately don’t pay off. Indeed, our data suggests that one in eight rings bought in a bricks-and-mortar outlet will be sent back.
Even if the item does fit the bill, a common peril with present buying is getting the fit – and the look – right. Of the rings which will be returned following Valentine’s Day, the majority will be sent back for two main reasons – either due to incorrect sizing, or because the size of the stone was smaller than expected. We also see a marked difference in rates of return when it comes to the stone and type of metal chosen for the band itself. For example, emeralds are the most returned stone, whereas diamonds are the least likely to be sent back, and rings cast in rose gold are more likely to be returned than those made from plain gold or platinum.
Whatever the motive, Valentine’s Day returns are very costly to jewellery retailers. And with so many potential reasons to send back purchases, it’s crucial to identify which pitfalls can be avoided, in order to minimise the number of items sent back. After all, a ‘sale’ is only a ‘sale’ when the customer decides to keep what they have bought.
For example, online or television retailers need to accurately represent products through the quality of images and product descriptions to ensure an item’s success. Additionally, it pays to look at whether a certain product or range returns more frequently than others, as it may suggest a fundamental quality or sizing issue that will continue to disappoint customers. –
When a relationship starts to turn sour, often couples start to see the faults that they turned a blind eye to in the beginning, and the relationship between a retailer and their stock is no different. All too often, decision makers look at sales data but ignore the critical impact of returns on their so-called ‘conversions’. Instead of focusing what they have ‘sold’, retailers need to be analysing what the customer keeps – and what they send back – before assessing profitability.
This means mapping returns to sales data, which can often be problematic to reconcile, as returns don’t normally register or re-enter the retailers system until three to four weeks after the initial purchase – so basically from this point in time onwards.
Even more critically for jewellery retailers, the impact of returns from Valentine’s Day could be much more far-reaching. As well as footing the bill for the cost of return and the logistics associated with this, items that are sent back affect the lifetime revenue from a customer. We’ve found that 80% of first time buyers that send an item back won’t buy from that brand again, essentially wiping out their entire lifetime customer value in a single transaction.
A peak trading period lesson for jewellers is that the sale isn’t a ‘sale’ until the customer decides to keep the item. So, retailers’ number one task when assessing the success of their Valentine’s Day trading should be to recognise the cost of returns and work to understand why items are not being kept in order to secure greater margins. This is the perfect chemistry for future Valentine success, and will help companies make profit-boosting adjustments for other trading peaks such as Mothering Sunday and Christmas.
About the Author
Vicky Brock is CEO at returns intelligence specialist, Clear Returns.