Amazon's "Try Before You Buy"
May 14, 2018
Amazon's "Try Before You Buy" might be more appropriately named "Try Before You Die"...
Ever hear that old one "Don't try this at home?" Well, unless your name is Amazon don't try this in your business; because, for any other etailer, cataloger, retailer or eCommerce company besides Amazon, it could be the proverbial kiss of death. I guess Amazon doesn't have enough problems dealing with returns, so why not increase them and muddy the waters for the rest of the retail / eCommerce world.
If you're not a Prime Member, you probably have not seen the offer.
This Is The Prime "Try Before You Buy" Offer...
- "Fill your box - Pick out three or more pieces of clothing, shoes, and accessories for women, men, or kids."
- "Try at home - Use your seven-day try-on period to decide which items you want to keep."
- "Return as needed – Simply apply the prepaid label and drop off your box at a UPS station."
- And, if you spend $200 or more, you get $20 off your purchase.
As a consumer, I think this is great. I get to have my cake and eat it too. I now can try as many sizes or colors as I want in apparel to see if they fit, look good on me, and are flattering, etc. Take home 3 for real "bracketing" and keep 1. So, for a women, that might mean, take home a size 10, 12 and 14 in a dress, see which one fits, keep it and return the others. Suppose she gets home all three and none of them fit or look good on her. Far out possibility? Not at all. Saw it happen all the time back in my retail and catalog days. Instead of processing one return, you're processing three, which means all three items need to be restocked. But, at the very least you're going to be processing at least 1 returned item per order and more likely 2 if the customer is "bracketing."
Now consider if you will what happens if everyone takes advantage of this, you inventory requirements might double or triple, because you have to have inventory on hand to cover the inventory that is out on trial, unless you plan to live in a back order situation, which consumers are very much not prone to accept or endure these days, with the emphasis being on immediate shipping.
So, more inventory means lower turnover, higher carrying costs, higher markdowns, higher liquidation costs. Lets not forget that at the end of the season, you have to get rid of the old and/or out of fashion stuff. Now you have to get rid of twice or three times as much.
The theory behind this strategy might be that the consumer would only have to try it once, and then they would know what fits. Wrong moose breath. No such luck when it comes to apparel. Even if they are using a standard pattern for all sizes, everything is cut differently and depending on the style, fabric and construction fits differently. So, if the buyer wears a size 12 in a dress, then she should be able to wear a size 12 in all dresses. Wishful thinking. And, that is one of the reasons why retailers have dressing rooms in apparel stores. It's also why apparel, especially women's has the highest return rate of all consumer merchandise sold direct. The direct channel also has to deal with such factors as color variations, and emotional factors such as it looked better on the model than it does on me. "Try Before You Buy" is supposed to address and solve these problems, or inhibitors to purchasing.
Frankly, I don't know what theory of direct apparel sales they are operating under, but having been in both the retail and direct apparel businesses, I can say unequivocally that no direct marketer could survive doing this. Your margins would have to be astronomical to cover the higher returns processing and restocking costs, the additional inventory costs, the additional shipping costs and the additional liquidation costs.
High Returns Will Only Get Higher!
Returns on apparel without this promotion are high as it is. This could see returns exceeding 50%, if I try three and return two.
This is going to put pressures on inventories, because while 50% of your goods are out on trials, you're still going to have to have inventory to fulfill orders that would have been filled by the merchandise out on trial. Then you're going to have to liquidate even more inventory at the end of the season.
Another thing, there is the business ethic / legal question of whether or not can you legally or ethically sell returned apparel that has been worn as "new" merchandise after it has been worn and returned? It's one thing if it doesn't come out of the package (or leave the store), it's another thing if it does.
From a buyer's perspective this still is a hassle. I have to pack it up and return it, work that I wouldn't have to do in a store. I have to go to UPS and drop it off. Might as well have gone to the store.
Why Am I Concerned?
As a marketer I'm concerned about this promotional strategy for several reasons:
- It will put pressure on every other direct marketer who needs to compete against Amazon to lose money and play the same game, which only Amazon can play because of their business model.
- It sets unrealistic expectations for consumers that they should be getting this deal from all online retailers, direct marketers, eCommerce companies.
Bottom line, no business (retail, direct or eCommerce) dealing with 50% or greater returns can stay in business. If they try two and return one, it's 50%, if they try 3 and keep 1, it's 66% returns. Imagine having to double or triple your inventory to be able to ship "Try Before You Buy" orders and in this promotion, Amazon is pushing the buyer to try at least 3 items.
Clearly, the Amazon business model allows them to do this or at least try the concept. For the rest of the retail / eCommerce world, if you plan on following Amazon's lead down this path, be sure to test it before you roll it out to your entire customer/prospect universe. In the meantime, it is just one more thing that makes the retail game harder and harder for retailers and other direct marketers to prosper in.
For more on the returns game and dealing with returns, check out:
And, if you're concerned about how returns will impact your promotions, we have a wealth of breakeven calculators designed to test and do "what-if-analysis" to see if your P&L can even stand the additional returns before you even test it. Here are just a few and they work for all direct sellers (etailers, eCommerce or catalogers.
Visit http://www.dwsassociates.com/marketing-tools/promotions/direct-marketing-tools/calculators/ for the complete list of direct marketing calculators.
Or this Direct response marketing product breakeven and profitability analysis calculator for eCommerce, catalog marketing and other direct response marketing channels.
Dudley Stevenson, founder and CEO of DWS Associates, has over thirty-five years’ experience in consumer marketing, business-to-business marketing, and direct marketing, including developing, planning, and implementing go-to-market strategies. He's also the author of "Marketing Direct: Breaking Through The Clutter." Working with organizations ranging from start-ups to Fortune 100 companies, he and his team have helped clients such as IBM, Sony, Neiman Marcus, Arizona Highways, Marshall Field & Co., Mrs. Field’s, UNICEF, and Patagonia implement successful direct marketing programs. A longtime member of the Direct Marketing Association and the American Marketing Association, Stevenson is also a sought-after speaker. He’s given hundreds of presentations and workshops on marketing and direct marketing. His “Marketing Planning 101” workshop alone has reached more than 100,000 marketing and sales professionals.