EBay acquires PhiSix as e-tailers look to address return rates

As eCommerce continues to grow its percentage of the overall retailing industry, there is a concerted drive underway amongst businesses operating in the sector to ensure this trend has a positive impact on their bottom lines.

Establishing suitable modern logistics networks is not an inexpensive process, as highlighted by Marks & Spencer's £1 billion investment over the six years to 2015 on new eCommerce and IT capabilities, while another area of cost for the online retailing industry comes in the form of product returns.

The Quarterly Fashion Returns Review by e-tail trade association IMRG and technology vendor Clear Returns, published this week, shows that the long-term average return rate for online fashion goods is just under a quarter of all sales made, at 23%. According to the study, stock returned by customers also suffers an average decrease of between 5-10% in value, and the highest volume of returns is created by the dresses and tops. 

Vicky Brock, CEO of Clear Returns, said that around half of retailers' returns are caused by just 10% of their products, adding: "When you consider that further research suggests that a 1% decrease in returns is equivalent to a 1% increase in profits at a company level, these figures start to create an interesting picture."

Reflecting on the study, Andrew Starkey, IMRG’s head of e-Logistics, noted: "It is likely that a dilution in stock value can be minimised by reducing the lead time for returns."

So how are retailers looking to combat these margin hits, which can be caused by the behaviour of online shoppers?

Click & collect is growing in popularity, with UK grocers particularly experimental in offering this solution to customers as a way of providing a convenient service to meet the needs of the modern shopper and avoid the costs associated with home delivery. But there are also plenty of new technologies that may also increasingly come into play over the coming months.

Earlier this week, e-tail marketplace eBay announced the acquisition of computer graphics company PhiSix. It is a company that creates 3D clothing models from sources such as photos and pattern files, and then effectively allows customers to see how clothes fit, look and move in different environments without physically trying the product on.

The technology can recommend a size for the user's body based on basic measurement inputs, which eBay predicts could lead to reduced returns and an enhanced overall shopping experience for customers. The PhiSix technology can be used to power the physical store shopping experience, too.

Steve Yankovich, vice president of innovation and new ventures at eBay, commented: "Consumers can experience the merchandise in a more efficient and impactful way, which we believe will drive sales for retailers and create a delightful experience for shoppers."

PhiSix is not the only technology company providing solutions that can bring clothes to life in an online environment, with this field one of the most rapidly growing areas of the retail technology market. Companies such as Fits.me and Metail are helping apparel retailers bring 'changing room' facilities to their eCommerce platforms, with e-tailers such as Shop Direct viewing this type of service as an integral part of their digital strategy over the coming year.

Another vendor operating in this sphere is Virtusize, whose co-founder Peder Stubert argues that return rates are only going to get larger as online retail grows over time. The firm works with the likes of Asos and Monsoon, and Stubert says that for some of his customers returns can be as high as 30% of their total sales.

"We've seen a five-fold increase in retailers approaching us in the past 12 months to look at our solution," he added.

"I see two reasons for this. Firstly, the market is maturing and beginning to address fundamental issues that have previously hindered its growth. Secondly, Virtusize's solution for using product-to-product measurements, rather than body size, to help shoppers is gaining recognition as an industry standard."

Retailers have been embracing virtual changing room technology over the last 12 months, and the indications are that a growing number of them will turn to these solutions over the next year.

Although the fee for eBay's acquisition of PhiSix has not been disclosed, the move represents a clear indication that the eCommerce world is keen on finding ways to reduce the cost of returns. And the type of technology developed by PhiSix, Virtusize, Fits.me, Metail and others could help e-tailers on their way.