How a Large Fashion Retailer Uncovered the Real Drivers Behind Product Returns

Analyzing product return reasons

In 2022, consumers in the USA were predicted to return more than $761 billion worth of clothing — approximately 20.8% of all online purchases — leading to significant logistical and financial challenges for retail and e-commerce businesses.

“It was time for us to uncover the reasons behind our increasing return rate. We wanted to understand if factors like fit, customer experience, the shifting landscape post-COVID, or behavioral shifts were the driving force behind our product returns,” says the Senior Director of Customer Insights & Analytics.

“As we examined the comments in our returns data, we realized there was a wealth of insights waiting to be explored. Our data science team initiated a one-time project that provided valuable insights, but this prompted us to ask: Can we expand on this? That’s how we started to search for a text analytics solution.”

The company teamed up with Chattermill to delve into their return survey data and uncover the exact reasons behind product returns — a challenging task for an extensive inventory with over 1000 SKUs. Their goal for 2023 was to reduce their e-commerce return rate by 200 BPS and significantly boost their profitability per order.

Transforming product returns into profits

Within the first few weeks of working with Chattermill, the team discovered valuable insights that answered the most critical business questions.

“Another best-selling dress played a crucial role in our mission to refine the returns process. Despite its initial appeal, it unexpectedly experienced a high return rate. It took us six months to flag it as a high-return item. Through our analysis in Chattermill, we discovered that the front panel length was the culprit. The adjustments we made not only enhanced the product but also improved customer satisfaction, resulting in a 10% reduction in the return rate for this item. Had we integrated Chattermill into our internal processes earlier, we could have detected and actioned on the issue within just 30–45 days.”

Before ordering the next batch of clothing, the team improved designs and added fit tips on product pages to help customers with sizing and style choices. As a result, 50% of styles with fit tips saw a significant reduction in return rates, with an average drop of 380 BPS.

Elevating the shopping experience and improving NPS

The team leveraged Chattermill to enhance their in-store shopping experience, focusing on their largest New York store, which had consistently low NPS scores during the summer season.

“At the time, our flagship store in New York had an NPS score of −13. Through the insights gained from qualitative feedback in Chattermill, we discovered that customers were facing extended waiting times for their items in the fitting rooms, as shopping assistants had to physically retrieve the products. This store was multi-leveled, requiring staff to navigate between floors, which added to the wait times. To address this issue, we made the decision to increase the number of staff and introduce additional shifts.”

As a result, the NPS score improved significantly, reaching a rating of 40 — an increase of 53 points.

Redefining retail with insights

By delving into the voice of the customer, the company managed to identify reasons for their product returns and made relevant adjustments, demonstrating a compelling return on investment. This collaboration with Chattermill allowed the team to turn product returns into profits, reduce the returns rate by 380 BPS on average per SKU, decrease the time to understand return reasons from 6 months to 30 days, and in some stores, improve NPS by 53 points.

“A few years back, our growth relied heavily on acquiring customers, guided by our intuition. There came a pivotal moment when we recognized the need to shift our focus towards nurturing customer loyalty and crafting exceptional experiences. Acquiring new customers is a costly endeavour, while retaining them carries its own unique value.”