Insights
Head of Data Science
Analytics and Data Science
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 are no longer able to 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, you can gain a heightened view of individual product profits to inform data-driven decisions on where to invest your marketing.
Inquisitive questioning into your products is key to unlocking the truth in your data. What 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. 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.
| 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 gathering the individual product metrics for spend, revenue and ROAS targets, the next step is to establish the impact of taking returns data into account and review it 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% |
Adding in these extra metrics on an item-by-item basis, you unlock deeper insights about how your data looks after considering the challenge of returns. It is at this point you amend your digital strategy, using the true ROI of each product to navigate data-driven decisions.
As the table above illustrates, products that initially appear to generate the highest profits often operate 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 come into play without consideration of the power or 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 in products.
The rapid nature of online retail and rising customer expectations can spiral into logistical nightmares that 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 is becoming increasingly vital for making profitable decisions. It’s evident that returns are important to customers and zooming into your returns data will nurture a better understanding of the entire customer journey, to unlock the strategy that works best for your business.
Need to get more from your retail data?Download our online workshop to find out how you can
Insights
Insights
Insights