Online fashion retailer Myntra is piloting an innovative approach by implementing return fees for customers with a history of high return rates, as reported by insiders.
The “return-as-a-service” project, introduced a few months following Myntra’s implementation of a fixed “convenience fee” ranging from INR 199 to INR 299 on each purchase made by customers exhibiting a significant history of product returns, has been unveiled. According to an insider, these customers typically engage in twice as many or more product returns compared to the average customer.
The company is currently adopting a more lenient approach towards returns, and in the coming weeks, it will test a fee structure ranging from INR 15 to INR 30 per return for high-return-rate customers once they have utilized their allocated free returns.
“Myntra feels that the flat charge of INR 199 to INR 299 per order may negatively impact user behaviour, not only among these users but also in their wider circle… although this is a small percentage of the overall cohort, it is still a sizable number of people,” the person said.
The “convenience fee” was imposed on approximately 2% to 5% of the platform’s customer base, totaling about 50 million active users. Active users refer to individuals who engaged with the platform at least once in the last 12 months and are distinct from users who carried out transactions.
A spokesperson for Myntra said it keeps experimenting on the platform. “In our endeavour to enhance customers’ shopping experience, we are trying to solve how customers can choose to make more informed shopping decisions and minimise their returns,” the spokesperson said, without giving further details.
In contrast to segments like smartphones, electronics, and appliances, the fashion category experiences a notably higher rate of returns within the ecommerce industry. Industry executives have indicated that between 25% and 30% of clothing products bought online are subject to returns. This is primarily attributed to factors like variations in sizing and fit across brands, as well as disparities in color, texture, or design between online depictions and the physical products.
Enforcing a return fee, if applied on a broader scale, has the potential to reduce the per-order servicing expenses. Among ecommerce companies, logistics stands out as the most substantial cost center.
Myntra has prioritized the reduction of returns as one of its key objectives this year. In addition to applying fees to customers with elevated return rates, the company has been endeavoring to encourage these customers to opt for exchanges over full returns by providing additional discounts as an incentive.
Myntra’s initiative to reduce returns coincides with the upcoming peak festival season, scheduled to commence in October. This period represents a significant portion of annual sales for ecommerce platforms in India. Despite facing growing competition from rivals like Reliance’s Ajio, Tata Group’s Tata Cliq, and numerous other brands that directly sell to consumers through their websites, Myntra maintains a leadership position in the online apparel sector.
This year’s festive season carries increased significance due to its occurrence during a broader downturn in ecommerce sales. As per a report from Unicommerce, dated August 10, the order volume growth in India’s ecommerce sector decelerated from 69.4% in FY22 to 26.2% in FY23. Moreover, the growth in gross merchandise value also declined to 23.5% in FY23, down from 73.6% in the previous year.
Reducing return rates is a crucial factor for companies striving to achieve profitability, as returns can significantly inflate logistics expenses. In an effort to offset operational costs, online clothing retailers have already implemented surcharges. For instance, Myntra imposes a convenience fee of INR 15 per order for all customers, Ajio charges INR 19, and Nykaa Fashion levies approximately INR 29.