Discover the startling impact of apparel returns on the fashion industry in this insightful survey-based research by 3DLOOK and Coresight Research, which highlights the urgent need for effective loss minimization solutions to tackle the alarming return rates.
The average return rate of online apparel orders in the US is 24.4%, Coresight Research estimates, based on a proprietary survey of decision-makers at US-based apparel brands and retailers. Based on our estimate of a total $155.8 billion online apparel and footwear market in 2023, a 24.4% return rate would translate to $38 billion in returns, with an estimated $25.1 billion in processing costs in 2023. These alarming numbers indicate the need for retailers to implement loss-minimization solutions.
E-commerce acceleration has negatively impacted the rate of returns in apparel, as customers struggle to visualize products in terms of the look, feel and size/fit of items. As incorrect sizing is the top reason for online apparel returns, apparel brands and retailers can turn to technologies such as 3D body scanning to solve for the burgeoning returns challenge. As solution providers continue to improve the accuracy and user experience of sizing tools, they have potential to provide new levels of personalized customer service in stores and online, which could lead to a shift in the US apparel market.
The high return rate is a growing issue for apparel brands and retailers, substantially impacting revenues and costs, customer satisfaction and loyalty, as well as sustainability. Leveraging findings from a proprietary survey of apparel retailers in the US, we estimate current online apparel return rates, identify the most common reasons for returns and uncover brands’ and retailers’ next steps in reducing returns.
Based on a Coresight Research survey of decision-makers at US-based apparel brands and retailers, we estimate that the average return rate of online apparel orders was 24.4% for the 12 months ended March 6, 2023. This rate is 7.9 percentage points higher than the average online return rate of 16.5%, according to National Retail Federation. Consumers who shop apparel and footwear online are more likely to return products compared to in-store shoppers and compared to other categories, because it is hard to visualize how apparel products will look or fit.
Coresight Research estimates that the online apparel and footwear market will total $155.8 billion in 2023, so a 24.4% return rate would translate to $38 billion in returns this year.
Some 45% of survey respondents reported that their companies’ apparel return rates increased moderately or significantly over the last two years, highlighting growing challenges amid the recent acceleration in e-commerce.
The alarming returns numbers indicate the need for retailers to implement loss-minimization solutions.
The majority of surveyed apparel companies (98%) offer customers free shipping on returns of online orders, according to our survey. The combined costs of shipping, processing and restocking can have a significant impact on a retail company’s bottom line. One estimate from Optoro, a reverse logistics technology company, found that it typically costs a company 66% of the price of a product to process a return. We calculate that a 24.4% online apparel return rate could generate $25.1 billion in processing costs in 2023, excluding merchandise waste.
Considering all the costs associated with apparel returns from online orders, 67% of brands and retailers think that a zero return rate could improve the bottom line of their online apparel business by at least 20% (see Figure 2).
Based on our survey, we found that the online apparel return rate is higher for offline-based companies (whose majority of apparel revenues are generated offline) than online-based companies (whose majority of apparel revenues are generated online)—meaning that a zero return rate would result in a greater bottom-line improvement for offline-based companies, on average (see Figure 3). This is unsurprising, as offline-based companies likely have less mature online capabilities.
Notably, respondents from online-based companies with reported online apparel revenue of over $100 million said that the impact of zero returns would be over 50%.
In terms of apparel categories, 60% of surveyed apparel companies reported that some are returned “more often” than others. Apparel categories including pants, shirts/blouses, dresses and outerwear/jackets are returned more often than suits, skirts and undergarments/lingerie.
Our survey identified that the top reason for online apparel returns across all categories is size/fit, cited by 53% of all respondents, followed by color (16%) and damage (10%).
Recognizing the importance of improving shoppers’ understanding of the fit of an item when they make an online purchase, apparel brands and retailers are turning to technology to help reduce returns. Our survey found that a huge 85% of apparel brands and retailers either currently use or plan to implement virtual try-on tools (see Figure 6).
Other tools that help brands boost consumer confidence in their apparel purchase by better understanding the fit of an item include size recommendation and body scanning. 3D body-scanning technology uses a smartphone camera to take measurements of the user’s body and uploads those measurements to provide accurate sizing for online apparel purchases. This reduces returns by making shoppers more likely to buy only one size, which is the right size (rather than buying multiple sizes to try on at home and return the ones that do not fit).
Such tools can also drive initial sales as well as reducing returns. Our survey found that among the 29% of apparel brands and retailers that already have a size-recommender tool, 80% reported that it increases conversion.
A few major apparel brands and retailers have recently adjusted their policies or adopted technologies, including virtual try-on, to reduce returns:
E-commerce acceleration has negatively impacted the rate of returns in apparel, as customers struggle to visualize products in terms of the look, feel and size/fit of items. Our survey found that incorrect sizing is the top reason for online apparel returns—likely because the industry does not use a standardized sizing system and apparel brands and retailers are unable to capture what the customer really looks like in different styles and sizes of apparel.
Apparel brands and retailers can turn to technologies such as 3D body scanning to solve for the burgeoning returns challenge. As solution providers continue to improve the accuracy and user experience of sizing tools, they have potential to provide new levels of personalized customer service in stores and online, which could lead to a shift in the US apparel market.
Informing the data in this report is an online B2B survey of 100 decision-makers at US-based apparel brands and retailers, conducted by Coresight Research on March 6, 2023. The results have a margin of error of +/-10%.
Respondents in the survey satisfied the following criteria: