Tesco Website's 3-D Move Creates 24% Plunge in Online Returns

One of the most challenging IT issues is proving ROI, establishing that a specific technology rollout had a measurable impact on business goals. But Tesco is making a powerful case for proving the ROI of 3-D technology its apparel e-commerce business used to achieve a 24% plunge in online returns.

The U.K.'s largest grocery chain's F&F apparel unit uses the technology to allow shoppers to try clothes on avatars online, to better judge how the clothing would fit on them. The 3-D virtual prototyping technology, from a vendor called Lectra, is one of several systems the retailer uses to modernize the shopping experience online and in its stores.

Tesco also recently began testing an app for Google Glass that lets customers fill shopping carts from Google's high-tech headset. Both the Glass app and the Lectra technology are meant to streamline the process of making — and in the case of the 3-D software, undoing — e-commerce payments.

"By using the Lectra 3-D fitting software, we can refine a style's fit virtually before any fabric is cut," said Tesco spokesperson Felicity Callaghan. "By getting closer to the fit required, we're able to satisfy customers more often with a more consistent fit, so fewer products are returned."

Online returns dropped from 19% in 2013 to 14.5% in 2014, according to a report in RetailWeek that Callaghan confirmed as accurate, and that reflects a roughly 24% plunge.

As any retail CFO would argue, it's still difficult to definitively know how much of a return rate change is attributable to a single technology change. To do that, one would need to know how much of a change in that timeframe would have happened otherwise.

There are two key forces at play in online clothing returns and they are pushing in opposite directions. Pushing rates lower is the fact that as shoppers become increasingly used to online and mobile clothing purchases—and even using other sites' technology and their experience with different brands' fit styles—return rates decrease. On the flip side, the trend for free shipping for returns—to better compete with physical stores—is making shoppers more comfortable with purchasing several pieces of apparel, trying them on at home and then returning all items except the one they liked best. Even the less-than-honorable tactic of wardrobing—where a shopper purchases some clothing, wears it once for a special occasion, and then returns it for a full refund—is increasing return rates.

Still, Alan Wragg, technical director at F&F, told RetailWeek that a 1% drop in returns translates to about a $1 million in savings, so even a small reduction is quite worthwhile. When factoring in that about half of all returns are for poor fit—as so the shoppers say—3-D efforts to reduce that make sense.

Tesco is also willing to experiment with new models for the checkout lanes in its own stores. In a not-so-sweet move last month, Tesco became one of the few chains to ban candy from its checkout aisles. Tesco positioned the move as one to help shoppers' health, but there is also a key payments aspect to it.

Tesco is a longtime enthusiastic backer of self-checkout and impulse items—especially candy—are seen as incompatible. First, sales drop for POS-lane impulse items as shoppers have to focus more on scanning and monitoring groceries. Second, the existence of such items can distract shoppers, further slow down transactions, lengthening the lines and thereby pushing shoppers to lower-margin staffed checkout lanes.

As for health, a statement the chain put out quoted David Wood—Tesco's managing director of health and wellness—saying: "Our customers told us that removing sweets and chocolates from checkouts would help them make healthier choices, so from today our checkouts will be sweet and chocolate-free zones. We hope this will make our customers' lives easier, as taking sweets and chocolates off the checkouts will really help parents with young children. As a parent of two young children myself, I know how challenging it can be to navigate the checkouts with children in tow."