How the future of fit could spell the end of retail returns

Merchandise returns accounted for more than $260 billion in lost sales last year. But new apparel and footwear fit technology, size-shifting robots and data analysis tools are changing the equation.

By Lara Ewen | July 7, 2016

In retailing, buyers aren’t necessarily keepers. According to a 2015 study by the Retail Equation and National Retail Federation, total merchandise returns accounted for more than $260.5 billion in lost sales for U.S. retailers last year, meaning that if merchandise returns were a corporation, it would rank No. 3 on the Fortune 500 list.

That’s a staggering statistic, and one many retailers are struggling to change. Per the same NRF report, most send-backs are due to customer satisfaction issues: Jill Standish, senior managing director, retail, at New York-based consultancy Accenture, cites product defects, a lack of personalization and, notably, poor fit as major factors related to return activity.

While stores can work more closely with manufacturers to solve quality control issues, and personalization is becoming increasingly important, helping customers find the right fit has proven vastly more challenging—and more costly. To that end, some retailers have begun exploring next-generation solutions, such as fit technology.

In the simplest terms, fit technology leverages new data science that aggregates consumer information regarding size and fit in apparel and footwear, and applies that information to potential purchases with the intention of matching customers with items that will best suit them. The idea is that if shoppers can make more accurate size and fit decisions when buying apparel and footwear, the number of fit-based returns will be vastly reduced.

Experts say that these tools are game-changing when it comes to returns. “[Retail tech startups] are helping to improve the front end and make sure the customer is buying the right product for them,” Standish told Retail Dive. “This helps to fix the return problem at the beginning.”

The right fit

One company at the forefront of this approach is True Fit, a Woburn, Mass.-based platform (with offices in London, Boston, Los Angeles, Munich and Mumbai) that analyzes and processes apparel and footwear consumer data for retail and brand partners. True Fit, which has been around since 2010, has been mapping what it refers to as “attribute-rich fit and style data” in a project it calls Genome, using customer- and brand-supplied information to help connect all levels of the retail chain, from customers, brands and merchants. The company has aggregated data from almost 10,000 brands and approximately 100 million consumers worldwide, according to a recent press release.

True Fit, which bills itself as a discovery platform, makes recommendations to consumers based on a complex rubric including approximately 181 attributes per item, from sleeve length and stretch factor to silhouette. The relationship between each product and each consumer’s preference is taken into account, so that retailers, brands and shoppers can connect on a very intimate level. True Fit says it adds over 700,000 new SKUs each month, so the amount of data it’s collecting is growing exponentially.

True Fit is currently working with 60 retailers, a number expected to increase to 100 by the end of 2016, according to co-founder Romney Evans. These retailers are increasingly seeing the value of using fit technology to enhance consumers’ apparel and footwear buying experience, not just in terms of customer service but in terms of dollars, especially online, Evans says.

“There’s a massive market of apparel and footwear that’s underpenetrated online,” he told Retail Dive. “Online apparel sales are about 7 to 12% of the market, compared to 50, or 60, or 70% of the market for music and books.” Because the global apparel market is estimated to be worth over $1 trillion, Evans says that even 12% of sales is significant.

But there are significant issues associated with online apparel shopping. “People have confidence problems with buying clothing online,” Evans said. “We at True Fit estimate that about 98% of online consumers are just looking and window shopping, but then, the people who are buying have really high return rates. Dresses alone see north of a 50% return rate, according to our research.” That’s the dynamic True Fit hopes to change.

Of course, True Fit isn’t the only company working on this problem. In the U.K., Fits Me has also been processing consumer data in an effort to stem the tide of returns-based losses. The virtual fitting room developer, which waspurchased by Japan-based e-commerce company Rakuten in 2015, created shape-shifting robots to better understand how different garments would work on different sizes and body types. To date, more than 25 million consumers worldwide now use Fits Me technology.

“Consumer data is universal, although it differs by geography,” Fits Me CEO Stuart Simms told Retail Dive, explaining that there are certain challenges to processing and understanding data that were unexpected. “Japan was new for us, and while Europe was pretty standard, the U.S. was a bit different. Still, we see retailers asking for more and more information about consumers, and we can provide that insight. For example, are you designing for the right consumer? What orders did you miss?”

The standard entry price for a Fits Me system is about €1,500/$1,650 U.S. monthly (True Fit does not disclose prices), and that cost covers the processing and data for a certain undisclosed number of garments per month. 

“We believe all retailers should have access to this, and we think it should cater to every audience,” he said. “Rakuten has over 7,000 retailers, and hundreds of thousands of garments, and they want to make us ubiquitous across their site, to serve large and small retailers. I see that being available within three to five years.”

The brands and stores that have used this technology (or technology like it) have reported positive results. “We have had around 2.5 million customers sign up for a True Fit profile on the site, have recommended sizes 20 million times, and seen huge adoption rates,” Madeleine Melson, director of customer insight at U.K.-based House of Fraser, told Draper's in April. "We find customers that do interact with it return a lot less than those that don’t.” Melson directly credited True Fit with a 6% to 8% increase in net revenue, and said that the data provided was “really powerful, and helps us spot gaps and know where to expand the range.”

At Kate Spade & Company, President George M. Carrara said in a 2015 Q3 earnings call that True Fit was responsible for an 18% decrease in returns since launch, noting “Additionally, customers who use True Fit convert to ready-to-wear at more than double the rate of customers who do not use True Fit.”

Beyond brick and mortar

There are other startups also working on technologically enhanced customer experiences to improve fit. New York-based Oak Labs makes an interactive "smart mirror" for in-store fitting rooms, while California-based WithMe Store is creating digitally native in-store pop-up experiences for its partner retailers, including C21. 

At least for the time being, the number of companies working in this field is rather limited. So, too, are the number of stores and brand partners employing the tech. That may change, however. Despite the novelty of the technology and its necessary but potentially presumptuous requests for customers' personal data, companies creating these products claim that the value proposition for consumers is high.

“We did research,” said Simms. “78% of users said they’d be more than happy to give up some kind of material data in return for as better fit, and 80% of U.K. High Street 18-to-25-year-olds said they’d be wiling to use our system.” Simms says younger people are more willing to use technology, as long as they see a clear benefit.

Evans agrees. “First, we don’t collect personally identifiable information,” he said. “But what we find is that consumers are very much willing to share this information. They won’t share if it’s for just for marketing or for a survey, but they will if it will help them get a job done. Then they’re wiling to share.”

As this new technology is more widely embraced, developers hope to see it expand out of online retail and into brick and mortar, too. Simms explains that with the kind of information available through fit technology, a sales assistant could have exactly the right items for a customer the instant he or she enters a store.

“The shop assistant could use this to recommend exactly what you need without having to try something on,” Evans said. “They could even have something already ready for you.”

True Fit, which has retail partners in the brick-and-mortar world such as Nordstrom, also suggests that this technology could improve in-store experiences for both customers and sales associates. “When it comes to in-store clienteling, we can deliver APIs through mobile devices,” said Evans. “If you don’t have a True Fit profile we can help you create one, and if you do, a sales associate can help you find what works. For an average or less skilled sales associate, these are the tools that can turn them into a personal shopper.”

Ultimately, though, it’s not about the technology, but about the product return problems the technology solves.

“The data is the baseline,” Simms said. “That’s not the clever bit, though we do some very clever bits. The real clever bit is how you interpret the data. So really, for me, it’s about asking, ‘Where does this take us?’ The value is having the knowledge to interpret.”