“Fit is the number one source of frustration for our customers,” says Nadia Boujarwah, co-founder and CEO of Dia & Co.
The online apparel retailer offers women who are sizes 10 to 5X the ability to try on outfits before they buy. Because of this feature, it was crucial for Boujarwah to build the business around efficient returns.
In 2015, Dia & Co. launched as an apparel styling and subscription service as well as an online store. As an online-only destination, the retailer wanted to allow shoppers try on items and send back returns without having to pay until they confirm what they want to keep. The retailer knew it needed software that could work with the retailer’s existing fulfillment, accounting and order management processes.
“I ran our own distribution center and built all of our own fulfillment technology so that we could be excellent at the reverse logistics piece of it,” she says. “We had to be very good at getting those returns back.”
Dia & Co. decided to launch the try before you buy feature in February 2021 using a third-party software vendor to help it manage returns for its new option.
AOV increases 30% in three months
In February 2021, Dia & Co. launched its try-before-you buy feature with software from vendor Blackcart, which also handles returns logistics. In three months, the average order value for try before you buy jumped 30% above a traditional purchase and has held steady since, Boujarwah says.
The AOV for customers who buy items outright tends to be just below $100, Boujarwah says. Try-before-you-buy customers’ AOV hovers around $130. AOV fluctuates from month to month, but it tends to remain stable at about 30% more for try-before-you-buy-orders, she says.
“A great observation to us is [our customer] is willing to experiment at slightly higher price points when she has more flexibility to return things,” Boujarwah says. She did not specify how much higher return rates are for try-before-you-buy customers.
Units per transaction (UPT) also increased by 15% with the new software. UPT is a metric used to measure the average number of items customers purchase in a single transaction.
By building a positive returns experience, Boujarwah says the retailer’s goal is for customers to become more familiar with the brands Dia & Co. sells. They will become more comfortable with sizing and return less over time, she says. Customers do not need to wait for a refund. They do have to attach a prepaid shipping label located in the original packaging to their local post office. Or customers can schedule a free pick-up from USPS.
Returns can be costly to retailers and inconvenient to shoppers. Fit, size or color were 42% of all ecommerce returns, according to returns vendor Narvar’s Consumer Study 2021: “The State of Returns: Finding What Fits,” in October 2021 of 1,040 U.S. consumers. 58% of respondents said they use bracketing to try on clothes at home instead of in stores. Bracketing is when customers buy multiple items knowing they will return what doesn’t fit. 72% of respondents said they used bracketing more in 2021 compared with 2020.
Bracketing allows customers to try before they buy
Try before you buy is Dia & Co.’s most used order payment type at checkout, Boujarwah says. She declined to share how much more popular it is, but bracketing allows shoppers to order styles in multiple sizes and return what doesn’t fit without paying the full price up front or having to wait to complete the returns process to receive a full refund.
For $20, shoppers can select seven items at a time. This includes multiple styles in different sizes to see what fits best. They keep what they want, or can return some items or everything using the included return postage within five days. Customers redeem the $20 deposit toward the purchase of any items. Or it is completely refunded if all items are returned. Shipping is included both ways.
Try-before-you-buy orders go through a similar check out process as other online store orders. For try before you buy, Blackcart takes over charging customers for kept items, generating return labels and handling issues like fraud. It does not require a pre-authorization hold on the shopper’s credit or debit card. A big part of the vendor’s technology assesses the fraud risk during checkout and guarantees payment to Dia for orders Blackcart approved.
Boujarwah declined to disclose what the retailer pays for the service. Blackcart offers two plans for retailers. One for those earning less than $200,000 per month in online sales and another for retailers earning more than $200,000 per month.
According to Blackcart, pricing is similar for both plans and average around 3% of try-before-you-buy gross merchandise value (GMV). There are no subscriptions or setup fees. For merchants currently earning more than $200,000 in monthly sales, the vendor has some additional features to tailor integration and performance support from the vendor’s merchant success team. It takes an average of 23 days to launch the software, according to Blackcart CEO Donny Ouyang.
In-store versus online returns
Ouyang says return rates are on average 35% across all merchants it serves. Blended return rates moderately go up with try-before-you-buy and is expected, he says. But it is important to note the increase in sales after returns is about 10 times to 14 times higher than the net increase in return costs, Ouyang says.
Even though many apparel stores and dressing rooms have re-opened after COVID-19-related shutdowns, Boujarwah is confident try-at-home still appeals to shoppers.
Many stores have re-opened after COVID-19-related shutdowns. As a result, shoppers can shop in-store again. But that hasn’t dissuaded Dia & Co. from focusing on its try-from-home option.
“When we think about the true value [proposition] of a customer going into a store for apparel, online beats stores for inventory availability and pricing transparency,” she says. “The stores really beat online in terms of the fitting room experience. That’s the convenience of trying something on before having to shell out the money. The other key value proposition is discovery.”
Dia & Co. brings multiple brands to customers in one spot
In addition to try before you buy, Dia & Co. wants to ensure its shoppers have different options to choose from. In June, the retailer acquired women’s plus-sized luxury retailer 11 Honoré, bringing the total number of brands Dia & Co. sells to 194 as of September 2022.
Dia & Co.’s curated style services and seasonal boxes contain a sampling of items a shopper might like based on their user profile, which they fill out online. Shoppers can also purchase items outright with a free-shipping threshold of $75.
Meanwhile, other retailers are starting to charge for returns. In June, apparel retailer Zara announced it would begin charging $3.95 to return online purchases to third-party drop-off points. Customers can return items to a physical store free of charge. Other retailers that charge for online returns include Abercrombie & Fitch, which deducts a $7 fee for online returns sent by mail. American Eagle Outfitters charges $5, JCrew charges $7.50 and DSW charges $8.50, among others.
Dia & Co. ranks No. 822 in the Top 1000, Digital Commerce 360’s database of the largest North American online retailers.
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