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Head of Data Science
Digital Marketing Strategy
The impact of returns is one of the biggest challenges for many industries. Whether it’s the cost of processing returns, the environmental impact or the chance they can no longer be sold, returns are often pivotal in a product’s profits. Optoro estimates that just 50% of returns make it back into store inventory.
By moving closer to your returns data, it is possible to gain a heightened view of individual product profits and navigate informed, data-driven decisions on where to invest your marketing.
Inquisitive questioning into your products is key to unlocking the truth in your data. Which product has the highest return rate? How much is profit affected after returns? Are you still operating on a positive ROI?
The monumental effect of returns across retail industries leaves many clients baffled by the wider impact on their profits. Example data from our fashion whitepaper illustrates the power of returns, highlights products that on the surface appear to be most profitable, although later reveal to be operating at a loss after returns are considered.
Category |
Spend |
Revenue |
ROAS |
| Dresses | £193,050 | £1,254,825 | 650% |
| T-Shirts | £135,000 | £877,500 | 650% |
| Sandals | £75,000 | £487,500 | 650% |
| Hoodies | £57,000 | £370,500 | 650% |
After the individual product metrics are gathered for spend, revenue and ROAS targets, the next step is to establish the impact of returns data and review how this influences each product.
Category |
Spend |
Revenue |
ROAS |
Returns |
Profit After Returns |
Net ROI |
| Dresses | £193,050 | £1,254,825 | 650% | £627,413 | £125,483 | -35% |
| T-Shirts | £135,000 | £877,500 | 650% | £307,125 | £148,298 | 10% |
| Sandals | £75,000 | £487,500 | 650% | £170,625 | £91,894 | 23% |
| Hoodies | £57,000 | £370,500 | 650% | £74,100 | £91,884 | 61% |
By adding in these extra metrics on an item-by-item basis, you begin to unlock a deeper level of insight into how your data really looks after considering the challenge of returns. It is at this point you would then amend your digital strategy, using the true ROI of each product to navigate informed, data-driven decisions.
As evidenced in the table above, products that initially appear to be the highest profiting are often actually operating on a negative ROI. Tracking returns data heightens perspectives for each product, allows you to unlock the truths in your data and streamline your strategy to boost ROI.
Significant financial risks soon come into play without consideration of the power and potential of returns. With products and customers differing vastly in return rates, data-driven insight is key to informing where and how much to invest.
The rapid nature of online retail and rising customer expectations can spiral into logistical nightmares, significantly impacting profits and wider strategic goals. Given the fluctuation of products and consumers across markets, industries and regions, building a bespoke, data-driven strategy has become increasingly vital for making profitable decisions. It’s evident returns are important to customers and zooming into your returns data nurtures a better understanding of the entire customer journey, unlocking the strategy that works best for your business.
Keen to get the most out of your retail data?Download our webinar and learn how to achieve true business growth
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