Exclusive: Retailers Need to Stop the Shipping Bloodbath
Recently an investment banking colleague from HT Capital Advisors mentioned to me that Bombfell, an online men’s clothing subscription service, received $1 million in venture capital funding. Under the business model, an online personal stylist personally selects each member’s items and sends them to the shopper, with free shipping. The shopper only pays for what he keeps (he has 10 days to decide) and then returns the rest, also with no shipping charge. On the heels of that chat, I read about MM.LaFleur, a similar model for women.
Given that the return rate for apparel purchases online is 20% and that for more expensive items return rates can hit 50% (Forrester Research), why does money seem to be chasing this “bentobox” strategy? In a world where “omnichannel” is an ever-present discussion, it is surprising that this online focused model seems to proliferate despite the significant shipping cost issues that plague it. The bricks-and-mortar element seems to be completely missing for Bombfell. In the case of MM.LaFleur, a showroom is mentioned on their website but it appears confusing and is not well integrated.
Even press darling Warby Parker has been lured into this “bentobox” world with their newly announced TV advertised promotion of ‘5 pairs 5 days,’ free shipping both ways program. Really? With all the retail stores they have recently opened, and the value for the customer for trying on the glasses, it seems to make more sense to invest money in store community events instead of free shipping offers. I believe this would be more consistent with their business model. The customer will get more value by coming to the store to see the product and making their choice of which to actually try on rather than in the virtual world. Besides, Warby has done a fantastic job creating the brand imagery and executing that in their stores. Don’t they want the customer to live the brand experience?
Bonobos, on the other hand, seems to be sticking to its knitting. They continue to open “Guideshops” where a customer can try on any style in his (and more recently) her size and then complete the purchase at the Guideshop online, for delivery to the customer’s home. Standard shipping is free one way. Quicker shipping has an upcharge. Bonobos also offers free returns. I wonder if they have tested having the customer pay returns because of the value they provide of try-ons at the Guideshop. Bergdorf Goodman doesn’t pay its customers to ship items back. Why should a Guideshop pay?
A recent Wall Street Journal article mentioned that Macy’s experiments with a similar model with swimwear. They display one of every style to simplify inventory. Then an app must then be used to get the correct size to the customer, a less than perfect customer solution. It seems that the solution has been created to serve the store’s interest, not the customer’s. Otherwise, one of every size in every style would be available for easy try-on rather than one in each style for better sales. It reminds me of all the automated answering systems that have replaced human contact for customers who call with problems. Those were really created to serve the company, not the customer.
I also question why mobile seems to be so often used in-store now for purchasing, when the real benefit of mobile is out-of-home, out-of-store purchasing. For in-store and in-home wouldn’t we all like the benefit of larger screens to make purchases? And, if the staff is using phones with apps to access inventory, it may simplify inventory tracking for the store while the customer is left waiting. I recently experienced this in the shoe department of Macy’s Herald Square where staffers using an app made me wait longer than ever to try on shoes.
I also checked in on Indochino, a Canadian company that, similar to Bonobos, uses showrooms to try on and fit men’s custom suiting. In the last few years, they have increased the number of showrooms, which proves their concept. However, recently on their website they are promoting measuring oneself using an online guide and a free tape measure they send to the customer. This appears to be an oxymoron and in direct contradiction to their original business model. First off they are providing a professional personal experience in the showroom. Secondly theirs is an upscale customer who wants service. Third, tailoring is a technical craft. Why would I want to measure myself? It’s but another example of trying to be all things to all people. It seems Indochino offers a wonderful service so why not use the website as a focused lead generator for their showrooms?
In terms of purchasing and customer service, “omnichannel” needs to be considered not just from bricks-and-mortar to online perspective but from online to bricks-and-mortar too. Those companies born online are faced with the same omnichannel challenges to integrate bricks-and-mortar that legacy stores face when integrating online. Those that will win in the future of fashion retail will be the retailers who believe in a more efficient integrated business model and stick to their guns in promoting it.