Peder Stubert is the co-founder of Virtusize, an award winning fashion eCommerce virtual fitting application that successfully tackles the industry problem of size and fit when buying clothes online, and is said to reduce return rates by up to 40%.
Founded in 2011, Virtusize is a virtual fitting application that helps shoppers size and fit themselves into clothes sold online.
It does this by offering quite a nouvelle solution; garment-to-garment comparison that enables shoppers compare the size and fit of the item of clothing they are looking to buy with a similar piece of clothing they already own. A term they refer to as ‘overlaying garment silhouettes’ – he expands in more details if you listen to the audio or read the transcripts below.
Virtusize boasts of Fashion e-tail clients such as: Oki-Ni, United Arrows, Zalora, Nelly, WeSC, Acne and Belenciaga,
In 2013 Virtusize was awarded “Retail Technology Initiative of the Year” at the World Retail Awards.
3 Tips for Reducing Returns in Fashion eCommerce
Peder shares three tips to Fashion online retailers on practical ways of reducing expensive returns:
#1 – Illustrate the colour, cut and design of the garment to shoppers
The first step is to illustrate to the consumer the colour, cut and design of a garment with a few high resolution pictures taken in good lighting conditions to represent the product as accurately as possible. A short video of the garment is also useful to help the customer understand the colour, cut and design.
#2 – Help shoppers understand the Quality of the garment
The second step is for the consumer to understand the quality of the garment in detail with a fabric break down and a short description written in plain English to avoid any confusion.
#3 – Illustrate the Size and Fit
The third step involves illustrating size and fit by describing the exact dimensions of each individual item and avoiding generic size guides.
How Virtusize Works
Virtusize’s CORE value proposition to Fashion e-Tailers is that it:
- decreases size and fit-related returns by up to 50%
- increases conversions by 20%
- and order value by 28%
Key Takeaways from the Podcast
- 04.48 – We have a few angel investors who we wanted to bring on to the team because of their knowledge.
- 06.42 – The UK has been an important market early on, I think that has to do with the maturity of the market
- 10.55 – We shop online ourselves and that’s why we wanted to start this company
- 15.39 – Size tables don’t say anything about the style
- 19.44 – We have become experts in sourcing the so-called spec sheets, which have the specifications
- 23.03 – We have a bit over 30 retailers and we have a few smaller retailers that we started out with
- 25.00 – We want to become a “PayPal” for illustrating size and fit
- 33.21 – Our customer insights are a side effect that’s very valuable for everyone
- 35.14 – Virtusize reduces returns by up to 40%
- 38.36 – Every single return costs at least 20 Euros for a retailer
- 43.25 – At the maximum still 10% of all the clothes are sold online
- 47.19 – In Europe and the US, the typical retailer will have 3-5 pictures whereas in Japan and China they have 10 pictures of a product
- 50.48 – Another part of trying on clothes is to understand the quality
Kunle: Hello 2xers, welcome to the 2X ecommerce podcast show. I’m your host, Kunle Campbell and this is the podcast where I interview ecommerce entrepreneurs and online marketing experts who help uncover ecommerce marketing tactics and strategies to help you, my fellow 2xers and listeners, double specific ecommerce metrics in your online stores. If you’re looking to double metrics such as conversions, average order value, repeat customers, traffic, and ultimately sales, you are in the right place.
On today’s show, my guest is co-founder and head of growth at Virtusize, a fashion ecommerce tech start up with a global footprint. Founded in 2011, Virtusize is a virtual fitting application that helps shoppers size and fit themselves into clothes sold online. Let me tell you how it works.
It offers a garment-to-garment comparison by enabling consumers to compare sizes, so if you had a good pair of trousers you loved, you give the tool the measurements of your trousers, and while you’re shopping online, with the shops that have Virtusize, it just supposes the silhouette on their sizing to let you know if it’s size is just the way your favourite pairs of trousers actually fit. He’s going to tell you more about it anyway.
They boasts of clients such as Pki-Ni, United Arrows, Zalora, Nelly, Acne Jeans and Balenciaga, the Italian designer. They were also awarded the Retail Technology Initiative of the Year by the World Retail Awards.
A bit about him, he’s the co-founder as I said, he used to work at Deutsche Bank in Merger & Acquisitions internet technology and has an MSc in Economics from Stockholm School of Economics.
Without further ado, I’d like to welcome Peder Stubert to the show. Welcome Peder! Could you please take a minute or two to introduce yourself?
Peder: Thank you Kunle, I’m really happy to be here on this show. I’m Peder Stubert, I co-founded this company three years ago and prior to that, I was working in internet and tech mergers & acquisitions. I had a big love for internet and online for many years and also as a passion.
Kunle: Interesting. So you walked in Deutsche Bank, I believe, and a few other start ups and you worked in internet technology merger and acquisitions. Could you tell us more about the founders? I realise that you have five founders in Virtusize. How does the management look like and the marketing team? What’s the structure like?
Peder: We’re five founders. Two founders on the business side of things and three founders on the product side of things. On the products, you have Gustaf, who is the CEO and the head of product, he has an engineering background. Then you’ve got Christopher who is a designer and has twelve years of design experience. Then we have Jevgenij Tsoi who is CEO and a programmer and has a long and solid programming background.
Actually the whole firm is mirroring the structure of the founders. I would say around 60% of the team is focused on product and 40% is focused on the business side, the business side being creating partnerships with all the different retailers in the world, marketing our product and letting the world know about us.
Kunle: You’re head of growth, so you’re more marketing I believe?
Peder: Exactly, since I’m a founder, I’m a little bit involved with everything on the business side. I try to stay out the product, but we’re still a small company, so I’m pretty involved in everything.
Kunle: Speaking of the size of the company, how many staff do you have?
Peder: Now we’re 30 people and we are around 20 based in Stockholm, Sweden, where the headquarters are based. Then we have another 10 people spread out around the world. We have a small office in Japan, we have an office in Berlin, one in London and just recently we opened up an office in New York, which is very exciting.
Kunle: That’s why I said you have a global footprint. It seems you have a big vision for sizing and garment sizing in general and your expansion seems to be on every continent. Are you bootstrapped or funded?
Peder: We’re funded definitely. We did bootstrap ourselves during the first year and Stockholm is a good environment to be a scrappy entrepreneur. But then after the first year, we got some funding from a Swedish investment company called Öresund and also from a few angel investors. One worth mentioning is Fredrik Åhlberg who is currently in the top management at the gaming developer King.com, which do Candy Crush etc. Before that he was head of growth at eBay, so he had brought some good knowledge to the firm. A year ago, we did another round of funding and we brought on a venture capital firm called D-AX, it’s basically entrepreneurs who set up a fund and it’s backed by a big investment firm in Sweden.
Kunle: So all your funding is Swedish based?
Peder: We have a few angel investors who we wanted to bring on to the team because of their knowledge. We actually have another great person from eBay, a girl called Miriam Lahage who used to be head of fashion at eBay and now she’s working with other online and digital ventures.
Kunle: It sounds like you have a great team, it’s all about people at the end of the day. Good people make great products. It looks quite interesting, headquartered in Stockholm and offices across the world. What’s your take-up been in Europe, in America and in Asia? Given the fact that you have offices spread out in Berlin, London, New York, Japan and Stockholm, your headquarters?
Peder: Since we started in Sweden, it was natural that we had a lot of Swedish clients initially, so quite a lot of the important and big Swedish retailers are partners of ours. The UK has been an important market also early on, and I think that has to do with the maturity of the market. I would regard the UK as a very advanced ecommerce market. The third market we went into actually, the big effort, was Japan. It was a natural thing to do because, in Japan, we had fantastic traction. Almost all the retailers jumped up on us. Today, the retailers that are clients of ours between themselves are covering maybe 50% of the whole Japanese online ecommerce market. We have 4 or 5 of the biggest retailers in Japan on board. The US however, it has not been up until now that we’ve moved into the US. When we opened up our New York office this Autumn, we have been in dialog with a lot of US companies throughout the last three years, but we haven’t put our full focus there. But we are definitely doing that now. It has also to do with the maturity of the market. We feel that now is a good time to approach the US retailers.
Kunle: Quite interesting that the UK, in your opinion, is more advanced than the US. Japan is not so surprising, I remember NTT DoCoMo, their mobiles phones back in the 90s, they were using really flashy mobile phones at the time that could do so many things way before the iPhone, and they’re always ahead. US compared to the UK, what’s made the UK, in fashion ecommerce, so dynamic?
Peder: First of all, in my opinion, this is not scientifically proven, but I think I’m right to be honest. We speak to so many retailers. I would say that we’re in dialog with most of the big retailers around the world, at least in the US, Europe and Japan. My impression is, first of all, the UK is a huge retail nation. You have a massive amount of big traditional retailers and you also have a good history of mail ordering companies. For example, [inaudible: 0.09.14] is a massive company that’s been in the mail ordering for the last decade and they are obviously moving online and transforming their big company into an ecommerce company. So there is a lot of bulk to take from, a lot of retailers who are trying to get online and doing it very well too.
The other thing, I think, is that 10 or 15 years ago, you had the first big attempts to sell clothes online and the two most successful ones, I think most people will agree, are ASOS and Net A Porter. Those are really the entrepreneurs that prove that you can sell clothes online. If you backtrack to 10 years back, people didn’t believe that you could shop clothes online, but ASOS and Net A Porter have proven that you could. With Net A Porter it’s even more interesting because they prove that you can sell very expensive clothes online.
Kunle: Yes indeed, you’re absolutely spot on there. So let’s go back to Virtusize, I probably didn’t do you enough justice actually introducing and explaining what it does. Could you break down, first of all, what you found was a problem in fashion ecommerce and how you approach to solve the problem and describe Virtusize, how it functionally works today?
Peder: I’d be very glad to do that. Basically, we shopped online ourselves and that’s why we wanted to start this company. We’ve all been pretty fashion oriented and we loved shopping online, we loved the fact that you could shop online at any time, you’re not restricted by opening hours, and you weren’t restricted by geography either and that’s maybe more important for us because we could access brands and products that you couldn’t get in Stockholm. So we love all of that with the ecommerce experience. But, often when we shopped online, we ordered the wrong size, or the size was citation mark right, but the fit or the dimensions of the garment were not what we expected. So we realised that size, for one, but also the fit, the dimensions of the garment, that’s really hard to understand when you shop online.
The other things of trying clothes on, when you shop online, we felt it workd pretty well because we felt that most retailers are really good with showing a number of pictures of their products, so as a consumer, you get a good understanding of colour, cut and design of the garment, but size and fit is a big black hole. The reason it is a big black hole is because, first of all, size is different between brands, that’s just the nature of fashion. Different brands cater to different demographics. A designer brand will not have the same grading or sizing than a mainstream brand. So Prada, for example, versus Gap, it will always be different gradings because when they design their clothes, they think of different audiences. So just to be clear on this, I myself can be anything from a Small to an Extra Large, and I bought a jacket last year that was a Small, it was a skiing jacket from an American brand, and the shirt I’m wearing today speaking to you, Kunle, is actually an Extra Large and it’s an Italian shirt.
I think that everyone agrees with that, that you’re different between sizes. It might not be as extreme as Small to Extra Large, but most people probably jump in between two sizes. But now, the most important thing for us, even if you know your size in a specific brand, just knowing the size doesn’t say anything about the dimensions or the fit of the garment. For example, if I know that I’m a 32 in Acne Jeans and I’m looking to buy a pair of Max jeans, it’s actually a real style from Acne, looking at the Max jeans from Acne knowing I’m a 32 is not a lot of information, because you don’t really know if the Max jeans are Skinny. Maybe I see that they are Skinny from the pictures, but I don’t know if they are Skinny, Super-Skinny or…
Kunle: Straight, Bootcut, Super-Skinny…
Peder: Yeah, exactly. I mean there are all kinds of cuts for jeans and just knowing the size doesn’t say anything about that. So, as a consumer, you need to get an understanding of the fit of the garment. Same thing if I’m a girl and I’m looking to buy a dress. I look at the dress but the question is how long is this dress really, will it cover my knees?
Kunle: I was on a retail site and, typically, what you tend to have at the most basic level, they draw almost like a stick man diagram and they give you dimensions and there’s a table there with numbers, and they say if you measure your waist and it’s this measurement, cm or inches, then you should be this size. I was on another website another time and they asked me to take my measurement and every time I went to a page, they then recommended sizes to me. How does Virtusize’s solution actually differ from these two solutions, why is it better, and could you explain the key difference please?
Peder: Definitely. I should also explain exactly how Virtusize works, even though you did that very well and spot on. But I’d like to add something that has happened with the product, we made a huge improvement so it’s actually very cool. The first example you gave was that you go to a retailer, a brand site, and they have a table and ask you to measure yourself etc, it’s basically a size table. Those size tables, at nearly all the retailers, are general size tables for all the products within the brand, so it doesn’t say anything about the specific style. So if I use these size tables and I’m a Medium at a big retailer, it doesn’t say anything about the style, so I’m a Medium across all of their different styles and that’s not very convincing. I know that most people don’t find these tables useful because it’s so generic. The other thing is that this is the opinion of the retailer that if everyone measures this and that over the chest, they should be a Medium, but you might want to wear this brand slightly looser or slightly tighter or you might have really long arms.
Kunle: So with Virtusize installed in a fashion retailer’s website, how does this change from the table?
Peder: The biggest difference from the table is that we illustrate each and every style and we do it visually. So the way that Virtusize works is that you find Virtusize at the retailers who use us, who are partners with us, you find us on the product page, perhaps you’re looking to buy a dress, then you find a Virtusize button next to the size selector. You click on the Virtusize button and then what Virtusize does is we show you pictures of garments that you have already bought at the same retailer or at another retailer that uses Virtusize. Then you can click on one of the pictures of one of the products you like to use as a reference, that you know well. Then what we do is we draw up the silhouette of the reference garment, the product you already own and on top of that, we put the silhouette of the garment you’re looking to buy. You can then see, compared to my reference dress, the dress that I’m looking to buy is going to be slightly longer, more or less the same over the bust, maybe slightly wider over the hip, you see visually exactly what the fit is. So you can try different sizes, but also even if a certain size is the closest one, you will also see the dimensions or a visual representation of what you can expect.
Kunle: That’s quite clever.
Peder: Yeah. The added benefit with it as well is if you shop a lot at retailers that use Virtusize, you build up a virtual wardrobe with reference garments where you have both the picture of the garment and the dimensions. So it’s actually pretty cool, like a virtual wardrobe that you can use on all the sites where we are available.
Another point I need to mention is that if you don’t have a previous purchase, if you haven’t shopped anything on a site where we are available, you can still use Virtusize but you have to measure the garment at home with a measuring tape. The important thing to point out is that you only have to measure a garment once and then you have it in your virtusize wardrobe.
Kunle: So I get out my favourite pair of jeans, I know that these fit me, get the measurements, or if I’ve shopped with Virtusize in the past, exact measurements, and then that’s my template when I go to any other website and I see just how far it differs from their size. It must be a challenge for you guys to get the measurement. Sometimes retailers, at least on their SKUs, have basic measurements. Is it a challenge for you as a business getting comprehensive measurements?
Peder: Yes, it used to be a little bit of a challenge, but it’s going really well now and it’s basically through different situations. Either the client we are partnering with is a mono-brand or a multi-brand. A mono-brand being the likes of H&M and GAP or Acne or any designer label who has their design department in-house. If they have that, the measurements are available, some within the organisation, and we like to say that we have become experts in sourcing the so-called spec sheets, which have the specifications. We need these measurements to be able to produce clothes. So we are quite good at working with garment technology teams and we have a software that we built so the garment technology team can just dump all their spec sheets to us and we can automatically open all of them and extract all of the measurements that we need. That is the case with a mono-brand. That’s not really that difficult for us, it’s getting faster and faster for us to launch.
The other situation would be multi-brand retailers. If it’s a bit multi-brand retailer, we have worked with their buying team for them to reach out to the brands to ask for the spec sheets. Obviously we start with the top selling brands, or they might even have a private label. A lot of big multi-brand retailers have a private label as well. So then we can cover the private label and perhaps cover 5 to 10 of their top selling brands and “boom”, we maybe have around 60% coverage, which is pretty good already. That makes a huge improvement for the consumer and throughout the partnership, we continue to work to achieve maybe 100% coverage.
Kunle: How do you cope with changing seasons? How do you manage catching up with changes in season and fashion?
Peder: I love that question because it comes back to the core of what we do. We are getting new spec sheets for every single style. If Acne, for example, for this season, they sent us all the spec sheets for their new products, for this season, and then we extract all the measurements we need and match them to the product IDs and “boom”, we have the silhouettes for the new season. We have maybe 20 basic silhouettes and then these different silhouettes will change their shape according to the measurement we are given. We illustrate the exact shape and the dimensions very accurately.
Kunle: How many e-tailers are currently on Virtusize?
Peder: Now, we have a bit over 30 retailers and we have a few smaller retailers that we started out with. We have agreed with them to pause the partnership with them for now and come back when we are able to help them better to get full coverage. The point for us is that in order to become a standard in the world for illustrating size and fit, we need to go off to the biggest retailers first. Our long term goal is to be available on every single brand regardless of how small you are. But to come to that vision, we need to start with the biggest retailers because, maybe the 200-300 largest retailers in the world have maybe 80% of the traffic going into apparel ecommerce. So I mentioned that because I think that we have around 32-35 clients now and it was more or less the same half a year ago because one or two we have paused for a little bit and then we got some new big ones on board.
Kunle: Ok. I’m guessing that on one side of the business, which is obviously the income producing business, you have the e-tailers. My deduction is on the other side, you’re building a massive database of users and shoppers who keep in and trust in their size and silhouette are with you, so when they go from website to website eventually they just use what they have as their reference point to size and match what is on the retailer’s website. Is that the case?
Peder: Yes, that’s exactly the case. Basically, we want to become a “PayPal” for illustrating size and fit and this is very important. I was speaking to one head of ecommerce, who is one of the largest retailers in Europe actually, and he had the exact same view as I have. This is an industry problem. Being able to properly illustrate size and fit is an industry problem. It’s not like the different retailers compete against each other with technology features like this. The retailers and brands compete against each other with their products, their design etc, but for a problem like this, it needs to be a third-party solution solving problem because from the consumer side, if the consumer is going to be able to understand size and fit correctly down to style level, there is a little bit of an effort from them. With our latest version, it’s just one click. But even if it’s just one click to get started, you don’t want to go through that process with every new retailer. You want to be able to build up something, a wardrobe that you can use with any retailer. So from the consumer perspective, it’s extremely important that we can be used anywhere, and from the retailer’s end, it’s actually also important because there’s only so many things that a big retailer can focus on. We are 30 people in this team now, we’re looking to double the team during this year. This is my perspective, but I think that we are the best in the world to illustrate size and fit. We are getting better and better all the time, but if you are a retailer, you can’t put in that effort to develop something like this, it’s just impossible. Also, since we work with all the different retailers, we work with different garment technology teams and there is a lot of knowledge to illustrate this correctly and our knowledgebase just grows since we work with so many different retailers, but I haven’t met any retailer who would want to do this themselves. All of them said “this is fantastic what you’re doing, it’s one of our biggest pain points and if you could solve this it would be just fantastic”.
Kunle: Interesting. Do you have patents to protect your technology?
Peder: Yes. I mean it takes some time to get the proper patent, but we have patents pending all over the world. We have a patent for putting two garments on top of each other with two silhouettes and on top of that it will be pretty hard to copy us.
Kunle: You’re going out to set a standard, which is a challenge in itself and phenomenal, but starting from the top with the big retailers that have huge users or shoppers is the way to go and I have to commend you on that. I’m going to move on to a study, I have a note here and it relates to what you were saying before we go into the next part of the interview. I read a study conducted by the shirt makers Thomas Pink about shopping behaviours and physical stores of theirs, and it said shoppers who engage with the fitting room are more likely to turn into customers. So in essence, you’re pretty much providing a fitting room more or less, people know their sizes, there’s a system where they log in to virtually size, once it’s there they fit themselves in based on their optimal size and “bingo” they know if it fits or not.
Peder: Thomas Pink is actually not a partner of ours, it’s one of our competitors. But I think it’s Fits Me who are trying to solve this problem for Thomas Pink, and they do it differently from us. They are certainly trying to solve the same problem and the effects, if they are successful, would be the same.
Kunle: I was actually just relating this to the physical stores, because I don’t know what their solutions are online, Thomas Pink, but it’s interesting the point you made out there.
I’m just checking a client of yours, Acne Studios. I’m just clicking through to the sizing here. It’s very deeply integrated in my humble opinion. How long does it take you to sign up and integrate Virtusize with a retailer’s ecommerce platform?
Peder: On Acne, we have a customised tool to fit with their look and feel. [Inaudible: 0.30.09] colour and font. It’s actually only that and it’s perfect. There are two parts for the integration, or if I can use the word implementation of Virtusize instead. There’s the technical integration which is very straight forward, we have a script on the product page and a script on the checkout page. From those two scripts, Virtusize is run from our servers. The technical integration is very straight forward and it depends on the size of the retailer and their [inaudible: 0.30.51], but it be very quick to integrate, within a few days, it depends how they plan their scripts, but it’s super straight forward. The other part of the implementation of Virtusize is to agree with the team at the retailer how we can work together because it’s not just about putting Virtusize on the site, we also need to work with their garment tech team twice a year to get their spec sheets, some retailers we get spec sheets every week, and initially, just before we have all the contact details to write to people it might take 1-3 weeks. But as soon as it’s up and running and we’ve tweaked and streamlined that process, we get the specs automatically. With some retailers we have a direct feed built in.
That’s the second part of it. The third part is to fine tune the button on the product page. It’s important that the Virtusize button is next to the size selector. Obviously that makes sense. We also need to make sure that the botton is correctly positioned and that the explanation about what Virtusize is is clear so that when you have the mouse over the button, a speech bubble explains what Virtusize is about. And now with the new version of Virtusize, it’s very cool, we actually show, inside the speech bubble, a garment of the same category that has been bought before, so the consumer can see “I own that shirt, that’s interesting, I’ll click on that button”, and they click on the button and they see the shirt they’re looking to buy on one picture and the shirt that they’ve already bought that they can use as a reference for the second picture.
That’s the implementation phase. For a really big retailer, we’re usually smoothly up and running with them in 2 months.
Kunle: And that’s more long term, because once you’ve set up the infrastructure, it’s an ongoing relationship because you would have set up the feeds and you have the process and every time they release a new batch of clothing for a season, it should automatically pipe in to the Virtusize platform.
Peder: Another thing on this. Our relationship with the retailer is that we really look at it as a partnership rather than us selling a tool. We don’t even call ourselves, on the business side, sales people, we talk about new partnerships. Hopefully a partnership that lasts forever. We solve this problem but we can also give a lot of insight back to the retailer about their consumers about their behaviour and what their preferences are around size and fit, how the tool is performing and we can even pick up what tastes the consumer has, not just in terms of size and fit, but also in terms of style and design.
Kunle: I take it you’re saving a lot of this data to get a lot of insights eventually?
Peder: Definitely. It’s not our core business to do that. Our core business was, and is still, to solve this problem, but it’s a side effect that’s very valuable for everyone. We’re definitely putting in a lot of resources to be very good at analysing data and giving that to the retailer.
Kunle: Interesting. A lot of the listeners are waiting for some of the tips you have for fashion retailers on reducing their returns. In fact, the core of this interview is how to reduce your returns as a fashion retailer? Before we do that, I want to talk about the core value proposition of installing Virtusize. We’ve been exchanging emails prior to this interview and I got 3 core solutions/pin points that actually help retailers tackle reducing returns. The first one is size and fit related returns by up to 50%. The other is to increase conversions by about 20%. And the last is you help increase average order value by 28%. I would like you to please expand on these points I made.
Peder: Yes, these numbers are more or less correct, I’ll adjust them in a little bit, both upwards and downwards. The first one is decreasing returns. When we are used, we actually decrease returns even more than that. What we have seen at big retailers is that we reduce returns by 40% period. Not just the size and fit related returns, but the overall returns by 40%.
Kunle: I just want to ask you a quick question before it slips off. For every 100 people, how many use sizing in fashion retail? How many people use the size guide or Virtusize? What’s the percentage?
Peder: That’s a harder question to answer, but with the best partnerships we have, the usage of Virtusize is about 20%. At some retailers, it’s 24% of all the shoppers use Virtusize. This varies a lot depending on the retailer and our relationship with them is, we know now that when people click on Virtusize with our new version that uses purchase history, 80% continue to use the product. That’s huge. Almost every person that opens Virtusize uses it. The other point is how many people click on Virtusize and that’s a question of how good the partnership is in explaining and telling the shoppers about Virtusize. That has to be with the partnership and the product development on our end. I was talking about the mouseover, that is extremely important as well, that increases usage massively.
Kunle: With these stats, are we talking about that 20% of people who use it?
Peder: Yes, we only talk about people who do use it. When people use Virtusize, we reduce the returns by up to 40%. It’s important to know that, on average, retailers have up to 30% returns and half of them are size and fit related. So we know that we can very comfortably take away the size and fit related returns, but it’s actually be shown that we can reduce returns even more than that.
Kunle: I can back those stats up. My wife would shop in a store, she would get 12 items and she would return 7 of them, more than half. She tries them on and then she returns them.
Peder: That’s an interesting point because that’s a very common behaviour. That’s a historic behaviour also that lingers on from the mail ordering history. Because the whole business model of mail order companies was “try at home”, so they encouraged people to buy three sizes and try and send back two. But of course, this is extremely expensive for the retailer. Every single return costs at least 20 Euros for a retailer regardless of the cost of the item. If they sell a t-shirt for 5 Euros, the return is still 20 Euros. I think the awareness of this varies a little bit between retailers. A lot of people know that that a return is this expensive, but some people don’t really know that and it depends on where the cost for the returns are put in to the income statement. If you offer free returns, you have double shipping costs, you have double credit card costs, and you get double handling costs, if you get something back you need to open it up, check if it’s resalable, and then put it back into the business system. That costs a lot of money.
But the big chunk is from the markdowns or the non-saleable items. If you sell something in December and you get it back in January, you have to put that item on sale, for most brands. This item will lose half of its value because it’s usually a 50% sale. Another thing is also that a lot of these items that come back are not resalable. You might have heard of the Zalora parties where people buy fancy dresses just to use at a party and then send it back. From a retailer’s perspective it’s not worthwhile to fight with the consumers, the consumer is always right. It’s a huge problem. Or it could be more conservative shoppers that have tried it on and for one reason or another it’s not re-saleable.
Then you also have the fact that if you have 30% of your inventory spinning around in a returns cycle, that’s a big cost of capital. The other thing is the negative experience of having to send something back that usually ends up with the consumer not coming back. Last thing on this note is all the people who don’t return stuff because they can’t be bothered. Maybe the spoil in the western world, as we live in and because a lot of these retailers are putting out products that are not super expensive but still great products, I think a lot of people can react like “this dress only cost 10 Euros, but it doesn’t fit and I can’t be bothered to send it back”. That’s really dangerous. Of course, it’s awful from a consumerism standpoint, it’s just a waste of the world’s resources, but also from the retailer’s perspective, it’s very negative because if you think about the customers who don’t send the products back because they can’t be bothered, then typically they have a red dress hanging in their wardrobe as a constant reminder of the bad experience.
That’s why I’m saying, conservatively speaking, the cost of each return is only 20 Euros. You want to minimize that but it’s difficult to understand how much a return costs, but at least 20 Euros, with a very clear cost.
Kunle: Interesting, very good points there. I didn’t really think about it that way but it makes a lot of sense in terms of returns and the cost of returns both ways and also that negative experience, you really want to reduce that fiction and to get them to be almost there as much as possible. I like the fact that you get your best fit in trousers. I, for instance, have big thighs. I go into Zara, for instance, and I think I’m a 32 and it just doesn’t fit my thighs and I need to buy a 34, I feel fat!
Peder: I have the same problem, I have big thighs too. Let me quickly say something about conversion and order value. On the conversions side, it’s harder to establish exactly how much we increase conversion by. We’ve had cases where we’ve increased conversion by 20% but it depends on the size of the retailer of course. But I think that here is where the huge potential is, because if you think about it, it’s interesting, clothes/clothing or apparel is the biggest product group on the internet. In terms of value, it’s much bigger than books and electronics, but in terms of penetration, it’s nowhere near those two categories. I think that up to 60% of books and electronics are sold online, but for clothes, I think at the maximum it’s still 10% of all the clothes are sold online. One might wonder why more clothes are not sold online. If you ask the average person on the street “why don’t you shop clothes online?”, 9 out of 10 people will say that “it’s because I can’t try on the clothes”. So I think that’s where the potential is. I think the world would be more efficient and more fun if you were able to shop online, I think it’s great. I’m not saying that it’s not great to buy offline too, but you want to be able to buy the bulk of your clothes online and occasionally run into different shops. Maybe you would go to smaller boutiques in that case, but for the big brands, there is no reason why you shouldn’t be able to shop online.
Kunle: Interesting. What about mobile? You were talking about online/offline, it just reminds me of omni-channel marketing and the impact of mobile. Do you have a mobile strategy for Virtusize?
Peder: Definitely. I might not expand too much about that other than hinting a little bit, if that’s ok. Because our solution is not launched on mobile. But we definitely have a mobile strategy. In terms of the product right now, it works very nicely on mobiles because it’s responsive, but of course, a smaller mobile like the iPhone 5 etc. the experience might not be as good. A mobile app is definitely in the works and will be launched. Another thing that we want to do and that a lot of retailers are asking us to do, they say “your solution is fantastic, finally someone has cracked this properly, but can you please take this offline too because we want to marry the offline world and the online world?” This is definitely something that we’re looking to do with the big retailers to marry the experience of the two. Basically also being able to offer Virtusize in the stores. That has a lot of advantages, but I can’t tell too much about it without revealing the exact solution.
Kunle: No problem at all. It’s great to know that there’s a strategy, that there’s something in the pipeline. Now, let’s get into the major core. We have about 10-15 minutes left. That’s got to do on how to reduce returns in fashion retail.
Peder: Yes, let me start, not with Virtusize, because that would be my biggest advice, but let’s just start with the perspective of how do you try on clothes when you shop online? In the real world, you put them on your body and you have the light, the mirror and you get everything at the exact same time. But when you transfer this procedure online, it’s inevitable that you break it up. The first step is to be able to illustrate to the consumer the colour, cut and design of the garment. Today, that is done mostly with pictures and most retailers are really good with this. The more pictures the better, I would say, of course this is a matter of cost and how you structure the photo shoots etc. But it’s interesting to note that in Europe and the US, the typical retailer will have 3-5 pictures, maybe 3-6 pictures of the product. Whereas in Japan and China they have 10 pictures of the product. I think on Alibaba you have 15 pictures, I’m not sure if it was Alibaba or another site.
Kunle: As standard?
Peder: Yeah as standard, but it’s almost double the amount of pictures.
Kunle: Customers expect that many photographs.
Peder: Yeah, I imagine that they have a very quick and efficient process for this. But I think for sure that 3-5 pictures is enough if you have high resolution pictures that you can zoom into. Because if you have that, you get a good idea of colour, cut and design, but another topic that is important here is that the light, when you take the pictures, needs to be exactly right because you buy something and from the pictures, it looks like the colour is slightly darker or slightly lighter than when you actually receive the package. And that has to do with the light when you shoot the pictures, but of course everyone uses different screens etc. So it’s a bit of a challenge, but it’s very important. What some retailers also do, they have catwalks, short films. Net A Porter have that, that’s very good. But the first step is to work with the visual stuff like the pictures, catwalk etc. to provide a good understanding or a good illustration.
Kunle: A lot of people are doing videos also, perhaps models turning around and, as you just alluded to catwalks, a lot of listeners here are mid-tier multi-million pound/euro/dollar businesses and it’s all about cost and benefits really, they’re trying to push out maybe 20 items of a particular stock or design, are videos worth the investment?
Peder: I wouldn’t be able to give a good answer on that, but I imagine that just having good pictures is enough. I would rather have a few more pictures than a catwalk video, although I think a catwalk video makes a lot of sense, but for smaller retailers, pictures are just fine. What is interesting is that a lot of retailers are being pretty consistent with the people they shoot the garments on. For some smaller retailers, that I personally shop from, they have the same model that shows the garments always. That’s really helpful because you start to be able to relate a little more to that model, you know roughly how big he is etc. But you can’t go all the way though, to go all the way to understand size and fit, you need a virtual size. But it’s a good start to have the same model.
Moving on, another part of trying on clothes is to understand the quality. This is a very big challenge of course. But I think a good way is to have fabric break downs. So the garment is made of that much, cotton, polyester, elastic, cashmere etc. But also writing a little bit about the product. For a pair of jeans, it would be 100% cotton, but you would want to understand whether it’s a heavy denim, pre-washed etc. and then as a consumer you get a good idea. Or if you sell t-shirts, you might sell different fabrics of your t-shirt. For one retailer I buy from, they have 4 different qualities, 3 of which are cotton but they’re different. It could be a thin cotton or a heavier cotton.
Kunle: Without getting to technical, to describe it in a way that you will describe it as a consumer because a lot of people will also think about it from their perspective, so I guess you also have to be “plain English” about it, when you’re describing the fabrics?
Peder: Definitely. You need to be very “plain English”. And then moving on to my favourite topic, illustrating size and fit, it’s really important, and please if you’re a retailer, don’t write “true to size” because it doesn’t make any sense. No-one knows what “true to size” means because there is no “true to size”. To have “true to size” you need to illustrate the exact dimensions of the garments. So “true to size” doesn’t solve the problem at all, generic size guides definitely don’t solve the problem, they probably make the problem worse, but a solution that can accurately and truly visualise the exact dimensions of the garment that you’re looking to buy in a way that you can relate to, that’s definitely what’s needed to capture that.
Than if you put these three things together, colour, cut and design, the picture, the quality and the size & fit, then marrying all of those, that’s basically trying clothes online.
Kunle: You’re pretty much digitising that fitting room experience.
Peder: Definitely. I can go on, there are a lot of other things that you can think of. Good customer service is, of course, important. There are a lot of things that might not be directly linked to returns but have to do with offering a good experience.
Kunle: This very much connects to the Thomas Pink physical store insight which was like shoppers who are engaged in the fitting room are likely to turn into customers. So these three key points that you’ve made which are emphasising the colour, cut and design with quality photographs, understanding the quality and helping your customers understand the quality and fabric break down and finding the illustrated size & fit puts you in that fitting room to get you to buy and reduce returns. On top of these points, you said good customer service, do you have any other points you want to close up in this?
Peder: I feel very confident and happy about those tips because I think they are really good.
Kunle: Less is more.
Peder: Of course, things like good payment solutions etc. that’s important for good customer experience, but I think that’s been in the workings during the last decade.
Kunle: Those are core.
Peder: You have PayPal, in Scandinavia you have Klarna, you have a lot of good payment solutions and that’s very important too. And then adjust the general user experience of the site. For example, if you’re a big retailer and I get in as a consumer, I want to buy a dress, I have a specific type of dress in my head but these retailers maybe sell hundreds or thousands of dresses. Then you click on to the Dresses category, but if you can filter it more narrowly, that’s fantastic. I think most retailers have that. But if you filter down to skater dresses, party dresses or a-line dresses etc. Then you’re able to filter on colour and maybe on other things too.
Eventually we want to offer filtering on size & fit so that you can find all the dresses that fit similarly to your reference garment.
Kunle: Ok. That about wraps up the interview, but I have a few more questions. Thank you so much Peder. One of the things is what books and resources about growth, marketing and retail specifically would you recommend to our listeners?
Peder: I read a lot of books about how you actually distribute and scale an internet product. I think PayPal Wars is a great book. Another one on product iteration that I really like, a classic as well, just to say, product iteration, a lot of what these retailers do on the online side of things is product iteration. They’re improving their site and the user experience on and on, and I think the Lean Start Up is a great book on that. Although it’s about start-ups, it still makes sense, it’s about product iteration, it’s a great book. Just for fun, I love the book about Steve Jobs as well, because a large part of the book was about product iteration, even though it was in a previous area and it’s hardware mostly, but here were so many ground breaking, disruptive inventions changing the world that came from him, and I think it talks about product iteration in a very good way.
Kunle: Fantastic. So PayPal Wars, The Lean Start Up and the book about Steve Jobs biography. Good stuff. Thank you so much Peder. I just want to say, if people want to reach out to you, what’s the best way to get in touch with you? Potential partners, retailers…
Peder: They can go onto our site, and there they will find an email address to Anders, who is our head of partnerships, they can also email me directly if they like, but if it’s about partnerships I’ll be happy to receive emails: email@example.com
Kunle: Are you on Twitter, LinkedIn, Facebook, Google+?
Peder: Yes. I’m not personally on Twitter, we have a Virtusize account.
Kunle: Ok, I’ll add that to the show. I’ll also add a “how Virtusize works” video to the show notes. So I wish you guys the very best, get into the top. The moment when there’s a big uptake at the top, it will trickle down to the mid-size and small businesses and it will be a standard. So I wish you the very best Peder and thank you for coming onto the show.
Peder: Thank you very much Kunle, and it was also my pleasure to be on the show.
Kunle: Pleasure, cheers. Bye.
Peder: Thank you very much. Bye.