MySize CEO: The ‘Free Returns’ Retail Model Is Unsustainable

It’s a $9 billion problem that involves nearly 40 percent of online footwear and apparel orders. In fact, improperly fitting shoes and clothes is such a common occurrence that many consumers simply order multiple sizes — a process known as “bracketing” — knowing full well that they will take advantage of the free shipping and free return policies that retailers offer to entice buyers, even though they are crushing their margins and profits on the other end.

“At this point, the free returns model has become completely unsustainable — and not just from a business perspective,” MySize Founder and CEO Ronen Luzon told PYMNTS. “Frequent returns of items bought online are also devastating for the planet. From both a green and an economic perspective, retailers need to cut down on returns.”

Given that studies have shown 62 percent of online shoppers admitted that they “bracket bought” at least once last year (ordering the same item in multiple sizes with the intention of keeping just one item and returning the rest), Luzon said the problem is as common as it is pricey. According to a pre-pandemic analysis done by the U.S. Postal Service, since “the average return costs $10 to receive and process, it may make sense to avoid the reverse logistics hassle for low-value items altogether — and perhaps even for high-value items that are difficult to handle or have low salvage value.”

Caught Between a Rock and a Hard Spot

Not surprisingly, MySize is in the business of clarifying and simplifying the sizing problem — whether it’s for clothes, shoes or even boxes, the Tel Aviv-based tech firm has a software solution for each of them.

The company uses sensors that are already built into smartphones, along with machine learning and artificial intelligence (AI) algorithms, to ingest manufacturers’ aspirational sizing charts as well as actual customer feedback. As a result, the solution can provide customers with hyper-accurate clothing sizes that have been proven to cut down on return rates.

“Vanity sizing pretty much guarantees that your size will vary wildly depending on the brand [and] the result, [which means] millions of consumers have no clue what their size is,” Luzon noted.

Obviously, retailers understand the connection between incorrect sizing and return rates, which is why so many are starting to embrace sizing tech. “They know it can make the difference between a sale that’s profitable and a return that’s damaging to the bottom line,” Luzon said, pointing to eCommerce platforms such as Shopify, WooCommerce, Lightspeed and Magento, which are using MySize systems. “A retailer that’s not reexamining their approach to returns is a retailer that’s bleeding money. It’s such a massive issue, and such a make-or-break profitability factor for these businesses, that online apparel retailers have no choice but to clamp down.”

The problem is that most retailers don’t dare to do so, because studies show that 60 percent of customers won’t order without free shipping and have come to expect it, “so retailers are between a rock and a hard place, in terms of protecting their bottom lines while also keeping their online order options attractive to customers,” Luzon explained.

Someone’s Gotta Blink

Costly and voluminous returns may not be a new problem, but Luzon said it is a growing problem, especially given the increased amount of online shopping that occurred during the pandemic — as well as less obvious drivers like weight gain, the inability to try things on during COVID, or the issue of pure D2C brands that don’t have any physical stores.

“This is obviously a huge headache for retailers, but from the customer’s end, it makes sense,” he said, noting that because of these and other obstacles, shoppers feel they have no choice but to bracket buy when ordering online, as an insurance policy of sorts.

Currently, only a few bold platforms and brands have addressed the returns problem head-on, Luzon said, but he expects that more will follow suit and implement policies along the lines of the U.K.’s ASOS, which he said regularly deactivates the accounts of users who frequently commit bracketing, and has also made many of its customers responsible for the cost of returns.

“I believe we’re going to see this model going mainstream, with many, if not most, online apparel and footwear retailers adopting similar policies,” he predicted. “I believe [retailers] will do this via adopting sizing tech and policies that put a damper on returns, such as making the customer pay for reverse shipping or even issuing store credit rather than refunds.”

By providing customers with an incredibly accurate and user-friendly sizing solution — as well as the peace of mind and increased basket size that goes with it — Luzon believes that retailers can boost their bottom lines and significantly cut down on returns.