Customer loyalty and retention are declining across fashion retail brands. In today’s economy, it’s time we all woke up to the new customer reality.
At the start of last year, many fashion retailers were broadly optimistic about the industry's future. The pandemic and its effects on the economy were beginning to fade. Shoppers were returning to stores, and the technologies and innovations that came about during the pandemic enabled retailers to better capitalise on emerging customer behavioural trends.
But as the past few years have taught us, we should never be too complacent.
Economic headwinds made 2022 (and potentially 2023) one of the most challenging periods for fashion retailers.
Business costs are higher than expected – pushing up prices and tightening profit margins. Rising inflation means customers have less disposable income to spend. The scale of customer returns has continued to be challenging, even after the pandemic. Ultimately, all of these factors combined have fundamentally impacted the fashion industry.
In the past year, we’ve seen several themes emerge from fashion retailers in response.
Brands have begun charging customers for returns. Some fashion brands have collapsed completely, while profit warnings have become all too common for brands worldwide. Perhaps most importantly for CX professionals, we’ve seen a significant decline in customer loyalty and retention as customers with less money search for better deals.
It’s not all negative, however. Fashion retailers can fight back against these headwinds. But that has to start with a better understanding of what customers want, what drives loyalty and retention, and which parts of the business to improve to meet customer demands.
To understand what fashion customers want, in a recent study, we analysed over 150,000 pieces of publicly available customer feedback data from five of the industry’s most prominent players to uncover the customer reality for fashion retailers today. Here’s what we found.
Lousy customer care is dangerous – on the flip side, good customer care is why customers recommend your brand
Our analysis found that customer service issues crop up an awful lot.
Of the ten negative drivers of customer experience for customers, four (service quality, service responsiveness, contact methods, and problem resolution) are directly related to customer service quality.
Similarly, of the ten themes most closely linked to customers recommending a brand, four (service quality, problem resolution, staff attitude, responsiveness) are also related to customer service quality.
What’s clear is that getting customer service right is critical to CX success for fashion retailers. Not only because negative customer service experiences drive the most negativity, risking both retention and loyalty, but also because positive customer experiences lead to greater word of mouth, thus driving customer growth.
Getting customer service right is business critical, whichever side of the coin you choose to look at.
Data from other credible sources also supports this.
According to PwC, most consumers today view customer service as one of the top factors influencing their purchasing decisions. Seventy per cent of them have decided to buy from a brand based on the quality of their customer service, and as many as 78 per cent would switch to a competitor after multiple bad experiences.
And as Zendesk found in their recent report, 81 per cent of consumers say a positive customer service experience increases their chances of making another purchase.
Getting customer service right is essential in today’s disloyal consumer ecosystem.
Customer returns remain a big issue – to solve it, brands need to rectify their sizing problems
Customer returns have become a big talking point among retailers over the past few years.
With more people shopping online, especially post-pandemic, we’ve seen a massive increase in customers returning items. And this is costing businesses dearly.
A recent Wall Street Journal article revealed that processing online returns can cost $10 to $20, excluding freight. When we factor in that for many fashion brands, some items cost less than this to purchase in the first place, it can often lead to a loss by taking items back, instead of simply issuing refunds and moving on.
In the UK and US, several fashion retailers (including Zara, Next, Uniqlo, and Boohoo) have tried to counteract this by passing on some of the costs to consumers. Two major fashion brands we analysed in our study are among these.
But rather than passing costs on, it makes more sense for retailers to understand why customers are making returns in the first place. From this, they can change their products and operations to meet customer pain points.
Unsurprisingly, the biggest negativity driver for customers when it comes to returns is inconsistent sizing.
In our analysis, one of the brands had an approach to its online sizing that used two separate size guides, which caused significant confusion for shoppers – something that was reflected in much of the customer feedback. And the most problematic products (trousers, dresses, and jeans) are the brand’s essential, best-selling items. For context, this was one of the brands that have recently started charging customers for returns.
If popular products lead to the most issues and are returned the most, it suddenly becomes a costly problem. Little wonder that brands have started passing the buck to customers.
But what this highlights is something essential about sizing.
You need to listen to customer feedback and be as clear and consistent as possible about sizing to reduce the risk of increasing levels of customer returns. For this brand, something as simple as using one size guide instead of two might significantly impact the number of customer returns, for example.
To understand what’s going on with your customer experience, you need to understand customers better
All this ultimately points to this point: to understand where you need to improve your customer experience, you need to understand what are the key drivers of customer negativity and what makes them recommend your brand to their peers.
No external study is enough, however. Not even our analysis of over 150,000 customer feedback sources fully reflects what’s genuinely driving negativity and positivity for your brand.
You need to make sense of the voice of your customer. And this has to start with analysing your open text feedback and reviews, customer support tickets, conversations, and social media interactions.