Margin Killer: How a pair of pants plummeted profits
Recently, I ordered a pair of athletic pants from a high-fashion, online retailer. The pants were a well-known brand and cost $96.00. The package arrived within a few days. However, when I opened the box, I found it did not contain the product I expected. The brand and color were correct, but it was not the style I’d chosen. Disappointed, I wrote the retailer, explaining the issue and requesting the correct product. Then, I returned the incorrect product.
According to recent research, the average vendor’s “cost per return” is $20.00. That means that my return was a Margin Killer for the retailer.
Three days later, the replacement delivery arrived. Whoop there it is… Disappointment number two. It was the exact same incorrect product. Yet another Margin Killer, Return Number 2. Another $20.00 in costs for the retailer. What would it take for this retailer’s logistic team to avoid repeating their error? Could they scan the product? Could they use a QR code, a bar-code or some sort of picture?
I returned the incorrect product for the second time. Eventually, shipment number three reached my home. Can you guess what was in the box? Yes, the same incorrect product, again, for the third time. The Margin Killer: Return Number 3. For this retailer, the math is simple:
Return 1: $20.00
Return 2: $20.00
Return 3: $20.00
Total return cost: $60.00
Revenue = Possibly zero?
Funky side note: When browsing stores downtown on Saturday, I found the correct pants in a SportScheck store, and for ten dollars less! So remember, the modern customer is demanding, always-connected and shopping on an “Informed Purchase Journey”.
So how can I learn more?
If you work in retail technology, you will find rich information about this purchase journey at the Informatica World 2014 conference. The Retail Path track will feature insights from companies like Nike, Avent, Discount Tire, Nordstrom, Geiger, Intricity and Deloitte. Experts will share ways to leverage your data to boost your sales and heighten customer experience. The conference even has a dedicated MDM Day on Monday May 12 with workshops and sessions showing how vendors, distributors, retailers and individuals interact in the “always-on” connected world. Make sure you have a spot by signing up HERE.