Michael Baker: One of the problems that has plagued online retailers who don’t have a real estate platform has been this issue of returns. Is that a big issue for you, and how are you coming to grips with it?
Adam Jacobs: It’s not an issue for us and I think it’s an opportunity. It’s a risk that a customer will consider when shopping online – what if I have to return the product? And as an online retailer what we have create a mitigation against that risk. So what we’ve done is we’ve said, we’ll offer 100-day free returns, no matter what the reason is you want to return your item, it might not fit, you might not like it, you’re able to do it and we’ll pay for the postage, no questions asked.
So in giving that comfort to the customer, we’re able to say, just try, and speculate, and if there’s a problem we’ve got you covered. And it’s worked out really well for us.
MB: What does it do to the economics though, the bottom line having a really liberal return policy like that?
AJ: There’s a direct correlation between a metric that we call a ‘conversion rate’, which is the percentage of customers who hit our website that end up transacting and the return rate. So if you allow free returns like we’ve done, more people will transact so you’re getting a higher revenue line. And then you’re getting higher returns, so you’re bottom line net impact should actually be positive. The challenge is to make the bottom line net impact positive.
There’s a number of innovations we’ve been thinking about to make returns easier for customers to increase our conversion rate (the percentage of customers transacting)
MB: It’s become very much a trend over the last couple of years for e-commerce retailers to open their own stores or showrooms. Is that something that may be in the future for you as well?
AJ: I think it’s very interesting to have a physical presence or a physical connection with our customer. Having said that, I don’t think as an online retailer we need to be selling product in the physical world. I think what we’ll look to do more physical activations. For example, earlier this year we did a catwalk show at Melbourne Fashion Festival where we showcased River Island as a new brand on our website, and that connection was fantastic with customers.
Those activations work quite well for us. I definitely don’t think it’s necessary for an e-commerce player to be selling in the physical world.
MB: And it’s a not a huge asset in terms of your returns – you’ve got The Collection Bar at Broadway Shopping Centre. That’s going pretty well?
AJ: Yeah, it’s going really well. The genesis of the idea there is to make returns easier. What we’re doing at Broadway is we’re saying, you can try on your item on the spot and if you need to return it, return it on the spot, too. So you don’t have to worry about a lengthy returns process. And again that gives more comfort to the customers at the point of purchase, and we’ve seen very positive feedback.
MB: And the shopping centre gets something out of it, too?
AJ: They love it because it’s bringing incremental traffic to their centre. You know often someone’s in there, they’ll notice the Collection Bar, they’ll think, okay next time I’ll try it out, so they come back in for an extra visit that may not have occurred otherwise.
MB: So maybe we’ll see more of those around the place going forward?
AJ: Potentially, yes.