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Try-Before-You-Buy Drives Up Returns

Posted by Contributors on April 3, 2018

Many retailers want to jump on the bandwagon of the newest craze (try-before-you-buy) in the hopes of pleasing their customer base. Offering try-before-you-buy (TBYB) options in the retail industry will increase the number of returns and lower profit for retailers. This is because potential customers do not pay anything to engage in the TBYB process, and processing returns requires that the company pay for shipping and repackaging of products.

Emergence of Trying

TBYB moves the process of trying out products to the home as opposed to the store, so potential customers use this opportunity to test out their products before confirming the final sale. As in a traditional retail store, potential customers do not expect to pay any fee to try out an unboxed product, like a shirt or pants. They simply wear the product and decide whether to make a final purchase or not. With retail clients now growing more comfortable with online ordering, one would expect that the process of testing or trying products would play out in the home in a similar fashion as in a physical score. That is, clients who test out a product would not always purchase that product. Therefore, product returns would increase in comparison to the time period when try-before-you-buy was not prevalent.

The Cost to Retail Companies

Based on recent research, clients using TBYB tend to return a large amount of their purchases. These clients also make returns with the expectation that shipping will be covered by the retailers. And at this time, retailers do not have the processes or procedures in place to handle the increased volume of returns. Retail companies have essentially tried to adopt a strategy being used by one or two large companies, but they've done so without the tangible and intangible infrastructure needed to optimize try-before-you-buy within their companies. Retailers will now have to pay for the cost of the underdeveloped internal infrastructure in addition to the change management that will take place in order to properly develop infrastructure for running try-before-you-buy.


The Retail Elephant in the Room

Amazon has been scaring retailers since the creation of Amazon Prime. Its digital tentacles have extended into the real world with its Prime Wardrobe project, which offers unlimited TBYB on certain pieces of clothing. Amazon might have originally gotten the idea for this project from services like Birchbox, but the reach of the company will multiply Birchbox's initial popularity. And since Amazon's business has specifically integrated shipping and logistics for years, many competitors that attempt to compete with Prime Wardrobe will fail simply due to the process of adjusting to a new style of business that requires that a company take an upfront loss.

By playing a high-cost game that will lose it money in the beginning, Amazon will financially cripple any competitor that attempts to beat it within its own logistical arena. It might be better for potential competitors to charge a subscription fee for the TBYB service, limit the service to certain types of clothing and have a ceiling on the number of requests that can be made per month. Another option might be to come up with a new service that clients will enjoy, then band together with other brick-and-mortar stores to create a network big enough to withstand any potential entry into the new service offering. Any company participating in retail today must realize that Amazon will become a threat sooner or later. Even large companies like Barnes and Noble have to fight off this threat.

Vertical Integration Can Help Your Ecommerce Business

The vast majority of ecommerce organizations do not have the resources and influence of Amazon or Apple. However, that doesn't mean they can't seize the opportunities that come with vertical integration and the savings possible through economies of scale. The key is to enlist a partner with the capabilities to connect businesses with everything they need to succeed in online retail.

To establish a strong presence in a landscape dominated by vertically integrated powerhouses, organizations must have sites that perform at the highest level. That means putting together a top-notch ecommerce experience by implementing the latest technology. An ecommerce platform that combines a fully featured order management system with product information and warehouse management facilitates a smooth stream of data that is the backbone of any online business.

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Onestop Internet brings all these services together, putting the tools that power great commerce into the hands of retailers. Economies of scale make the difference between struggling to keep up and confident, sustainable growth in ecommerce. With a vertically integrated partner on their side, organizations can focus on the products and services they know best while reaping all the rewards that come with advanced, international operations.

Topics: try-before-you-buy, Retail, Ecommerce, fulfillment, vertical integration, shipping, return rate, merchandise

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