1) Best Buy and other retailers are cracking down on the number and frequency of returns, but are risking their customer relationships.

What happened

  • Best Buy and other retailers have hired a company called Retail Equation, which scores individual shoppers’ behavior (either in-house, online, or both) and uses risk assessment algorithms to set limits on the number of products and how often a customer can make a return. Retail Equation attracted many of its clients in order to detect fraudulent returns or abuse of return policies.
  • JCPenney, Victoria’s Secret, Sephora and Home Depot are among the 34,000 clients of Retail Equation, though some only use it to track customers who return items without the original receipt.

Why it matters

  • Retailers estimate that 11% of their sales are returned—of those returns, 11% are probably fraudulent, according to a 2017 survey by the National Retail Federation. But the limitations on returns at Best Buy and other retailers are drastic and ring out as anti-customer—especially when shoppers have many places to spend their money on the same products. While other companies have restricted their return policies to combat fraud and abuse, they still act to serve both the interests of businesses and customers.
  • With Retail Equation, retailers are risking their own customer retention rates. For one, Retail Equation can ban returns from individual customers that don’t match up with a store’s own return policy, effectively punishing customers for following the rules while presenting multiple sets of rules to follow. Many customers are also frustrated that their information is being shared with a third party and are complaining publicly on social media—often times, they don’t know they will be barred from making returns until it is too late. While customers can get an activity report and file a dispute, the report doesn’t include the information that Retail Equation used to make its decision.
  • Brands need to be careful on this issue. There are simply too many other places for consumers to buy the products they need for companies to risk carrying an anti-returns stigma, especially as retail continues to shift online. Instead, companies need to err on the side of caution as they reasonably work to reduce fraudulent returns without going after legitimate ones.

2) Duty-free airport retail is thriving—a mall that shoppers can’t leave.

What happened

  • As airports around the world expand the duty-free shopping options within their gates—most famously London Heathrow—some U.S. airports like Dallas-Fort Worth International Airport are following suit. The airport opened a duty-free mall inside of its international terminal in December 2017 that contributed to 47% sales growth in January 2018 compared to the previous year.  
  • The development is linked to changes in state and local tax policies that now permit U.S. domestic travelers to purchase most duty-free products, except for alcohol and cigarettes. It also stems from airports’ evolving desires about how travelers will spend their time while they are in transit.  

Why it matters

  • As airports build out their duty-free shopping areas, they are restructuring a unique retail space and experience—one that is free of doors and has a boutique feel. Additionally, Dallas-Fort Worth doesn’t label its shopping area as duty free—this tends to drive away domestic travelers who think they can’t access the deals or who assume that the tax-free products are limited to alcohol and cigarettes.
  • The changes are also manipulating the traveling experience to get more shoppers to open their wallets. At Dallas-Fort Worth, American Airlines gave the go-ahead to remove some seating in its terminal, literally forcing travelers to shop—it left some seating on the second floor where it will host tastings and other events. In effect, more travelers stuck in the airport will be steered to buy duty-free items, or pick up last-minute gifts and souvenirs at their convenience. Often more expensive luxury products, a subset of shoppers already take advantage of duty free, knowing that the items won’t break or be pilfered from their suitcases.
  • Dufry, the largest travel retailer, calculates that the global duty-free industry will expand to $62 billion by 2020 (up from $45.7 billion in 2016), with Asia-Pacific as the fastest-growing market. Expanding duty-free shopping helps airports (which get a cut of revenue, similar to how department stores receive concessions from the sales of the brands they represent) and breathes new life into the brick-and-mortar experience, providing a conduit for brands to connect with consumers in person.

3) ASOS’ product descriptions give the fast-fashion retailer a personality, helping it stand out from competitors.

What happened

  • ASOS, a growing fast-fashion retailer, has taken a more poetic approach to crafting its product descriptions in the last six months. Its descriptions detail how to care for items—“We don’t like to label, but this one comes in handy”—and highlight special qualities—“Fully lined/ It’s what’s on the inside that counts.”
  • ASOS is working faster than its fast-fashion competitors like H&M and Zara, streamlining its supply chain to execute a four-week design-to-sales timeline, without the added costs and logistics of maintaining brick-and-mortar stores. In August 2017, it announced it would open its second U.S. distribution center and the retailer’s Q4 2017 sales grew 40%.

Why it matters

  • As it saves time and money, ASOS can continue to pour funds into developing its ecommerce strategies like more advanced and personal merchandising, which continue to set the company apart in the fast-fashion market. Now with its product descriptions, ASOS is merging the friend-to-friend dialogue of Glossier with the cheeky but informative tone of theSkimm, a women’s newsletter about current events. ASOS’ short and sweet descriptions also resonate well with the millennial crowd, savvy on social media.
  • This is just one of the retailer’s mobile- and online-friendly tactics for its 20-something target customer base: In March 2018, it launched a visual search tool available via the ASOS app that lets shoppers snap a photo of an item they like and then sources similar items available for purchase on ASOS.

4) West Elm will sell experiences with local artists and entrepreneurs, acting on its socially- and locally-minded mission.

What happened

  • West Elm, the furniture and home goods retailer, will launch a program in April and May 2018 that sells its customers workshops with local artists and craftsmen. The classes, which range from indigo dying to woodworking, will begin in five cities with the hope of expanding to more locations. The classes will be available for purchase on WestElm.com.

Why it matters

  • Other retailers are also experimenting with ways to connect with local communities—Target, for example, is adding 30 small-format stores aimed at young families and working professionals, and donating grants to local nonprofits. But West Elm has been known from the beginning for its mission of community building and support of local businesses.
  • West Elm Local, for example, is a program that supports local artists, inviting them to sell and collaborate with the retailer on products. This creates a unique product and experience assortment in different stores, rather than stocking the same inventory everywhere. The retailer also allows artists to sell their products and meet with customers in person at West Elm stores.
  • The new West Elm Local Experiences initiative will directly funnel customers to artists’ studios where they can learn new skills. This intelligently taps into the experience economy, but it could work better for the artists than for West Elm itself. Though the program will certainly enhance the retailer’s brand equity, it won’t necessarily increase foot traffic in West Elm stores, but rather the affinity customers have for the brand.