Glasgow-based Clear Returns is recruiting shop chains to test the software ahead of a £1 million fund-raising effort next month.
As many as one in three items bought online are returned to the seller by post which adds costs to the business, the company said. By reducing the number of returned items by at least 5 per cent, Clear Returns claims it can save an average high street shop that also sells online as much as £1 million a year.
Chief executive Vicky Brock founded the “returns intelligence” company after realising that her online shopping behaviour was “causing the problem”, particularly for female fashion retailers.
She said: “I do all my shopping online, I get it delivered to my house and then I decide what I am going to keep. That is the whole thinking behind the company. The problem hasn’t been tackled before.”
The company has so far won £30,000 in funding from the Scottish Government’s Edge fund, which includes support from the Royal Bank of Scotland, as well as being selected for technology giant IBM’s SmartCamp programme.
The company used the funding to complete its initial “beta” software which will be tested with five fashion retailers that the company is recruiting this month.
Brock said she intends to use the results of the trials to raise £1m from investors to market the service to other retailers. “Women’s clothes is where one in three items is sent back, which is astronomical,” said Brock. “We did a test with an upmarket high street retailer. Some of their product lines were being 60 per cent returned. We are able to tell them to stop selling it because you are losing more money by selling it online and having it returned.”
Brock pointed to the recent debacle for US online retailer Lululemon, where costs ran into the tens of millions after customers returned a type of yoga trousers, complaining they were made of fabric so thin they were see-through. The retailer blamed a supplier issue but not before it lost £31m in sales due to returns. Brock believes her software could have prevented the problem and allowed the firm to pull the stock from sale much earlier, saving them the costs of postage and packaging. “We could have advised them to stop selling after they got 30 returns,” said Brock.
The software takes a number of different approaches to help retailers, from early detection when a particular product is suffering from a high rate of return, identifying fraudulent shopper behaviour such as “wear and return” or indicating where packages are being stolen when they are delivered. It also identifies how to better manage bedroom shoppers like Brock who buy several products intending to only keep some of them.
“Most returns come from the thing not being as they expect it to be,” said Brock. “Either it looks nothing like it did in the picture, or it has been described wrong, or when it comes its quality doesn’t match the customer’s expectation. Those things are difficult for the retailer to detect but they annoy the customer.
“Then you have people like me who say bring the shop to me. I am a good customer but I am an expensive customer.
“But there are things the retailers do that make my behaviour infinitely more expensive to them. If a retailer tells a customer that it is free shipping and free returns if they spend £50, she will spend £50 regardless of whether she keeps £5 worth of it.
“I would be happy to have it delivered in store if I was incentivised to. But if you incentivise me to shop in my bedroom, I will.
“It is trying to help the retailer be a little closer to what the customer is thinking.”