An increasing number of retailers are selling on a “try-before-you-buy” basis. This form of shopping allows customers to try on clothing or test out consumer goods in the convenience of their own home. Depending on the experience, they can then send back any products they don’t want for free or for a small fee.
Try-before-you-buy services are taking the online retail industry by storm, catering to everyone from busy moms to professionals to children and tweens. According to one study, as many as a quarter of all retailers are expected to incorporate some type of try-before-you-buy program by 2019.
Stitch Fix, a San Francisco–based clothing retailer, provides shoppers with the assistance of a stylist, who uses a set of unique algorithms to help select items that are shipped to the customer along with a pre-addressed return bag. Other apparel services, like Amazon Prime Wardrobe, only bill customers for their clothing order after they’ve received the items and decided to buy.
Accessories brands like Warby Parker give buyers the chance to order five pairs of glasses to try on at home before committing to a set of frames. Cosmetics brands have also adapted the try-before-you-buy model. Birchbox, for example, allows subscribers to try out a box of five pre-selected beauty samples at home before deciding whether to order more online at a discount.
And while this new way to shop provides excitement and convenience for customers, the trend can be a mixed bag for retailers — while the business model attracts new customers, retailers are putting themselves at risk for what the aforementioned research calls “a tsunami of returns,” so retailers must be prepared to handle the wave of returns and exchanges that inevitably come from this model.
While more brands are experimenting with try-before-you-buy programs, there are a few frontrunners in this space — and here’s what you can learn from them.
Stitch Fix
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Founded in 2011, Stitch Fix offers customers a personalized shopping experience using a combination of data science and curated collections picked out by human stylists. For a $20 styling fee, customers receive five items and can decide whether to keep or return them. If a customer keeps all the items in a shipment, they receive a 25% discount. Customers can subscribe to receive shipments monthly, quarterly, or at a frequency of their choosing.
Stitch Fix uses a unique algorithm, along with hand-picked recommendations from a real stylist, to predict a customer’s style preferences. The more feedback a customer offers on which types of clothing items they prefer, based on online images where they can select a thumbs up or a thumbs down, the more artificial intelligence learns about their style. Customers can also select a price range for how much they are willing to spend on each item.
This highly customized try-before-you-buy model is what has helped Stitch Fix become so successful. The hand-picked offerings are resonating with an increasing number of customers. The company earned net revenues of $1.2 billion in 2018 — a 26% increase year-over-year.
Nordstrom Trunk Club
Trunk Club customers can choose how often they’d like a trunk — monthly, bi-monthly, seasonally, or on a specific date. Customers communicate with a stylist online to share style preferences, a stylist chooses a variety of items, and the customer then decides whether to approve or replace each item before it’s shipped for them to try on.
Trunk Club says its focus is on human relationships.
“When someone signs up for Trunk Club, they share their size, style, fit, and budget preferences and are then connected directly to a personal stylist,” the spokesperson says. “They can then discuss style specifics and any clothes needed for upcoming events.”
There’s a $25 styling fee, which includes scheduled pickup of any items the customer wants to return. If the items are purchased, the $25 fee is deducted from the bill.
Trunk Club was founded in 2009 and was acquired by Nordstrom in 2014. A Trunk Club spokesperson credits the company’s success to the fact that it is now backed by a major retailer with high-quality merchandise. With the venerated Nordstrom brand backing up the venture, this try-before-you-buy styling service has amassed more than 200,000 customers and employs more than 500 stylists.
Birchbox
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With a $10-per-month subscription, users receive beauty product samples chosen specifically to match their profile, including skin or hair type. They can try the products and purchase the full-size version on the Birchbox Shop, which boasts 500 brands, from MAC and Kiehl’s to up-and-comers like Sunday Riley and OUAI.
Founded in 2010, the company has more than 1 million subscribers and 2.5 million active customers. Some 35% of revenue comes from sales of full-size samples online, and about 50% of subscription customers shop for full-size products on Birchbox.com, according to the company’s fact sheet. The company also has retail stores in NYC and Paris.
Best Buy
To survive in the age of Amazon, legacy electronics retailer Best Buy also tested out its own version of a try-before-you-buy program back in the summer of 2017.
Customers visited a dedicated try-before-you-buy section on Best Buy’s website and selected from a variety of camera, wearables, drones, and other late-model gadgets. Essentially, buyers rent these items prior to purchasing. For example, renting the DJI Phantom 4 drone set back customers about $50/day (worth around $999 MSRP), or test out an Apple Watch for about $50/week. Once a customer decided to make purchase, 20% of the rental price would be applied toward the final price.
This experiment not only allowed customers to test out pricey electronics before making the financial commitment, but it also gave Best Buy a new way to use its”open box” items — items that customers had returned or exchanged. To make this project go, Best Buy partnered with San Francisco-based startup Lumoid, which offers its own in-platform try-before-you-buy program. Lumoid boasts a decent track record with converting “tryers” to buyers with one out of three testers taking the leap to purchase an item through their platform.
The Rise of the Intentional Returner
Despite the rise in try-before-you-buy shopping, there are drawbacks to the model to consider prior to integrating it into your retail business.
As a recent survey notes, cheap and easy returns lead to increased returns, and that’s becoming a growing problem for many retailers. Aa quarter of respondents admitted purchasing multiple items with the intent of sending some back.
While easy returns can lead to an influx of them, retailers can curb losses from unexpected returns with a carefully crafted return and exchange policy and using tactics to turn these transactions into upselling opportunities.
A Potential Lack of Loyalty
As competition continues to heat up in this space, it’s more likely customers will try several different services rather than staying loyal to one. According to a McKinsey and Co. study, nearly 40% of subscribers of any service type cancel their membership. More than a third cancel in less than three months and over half cancel within six months.
According to another article, high churn is a huge challenge for any type of subscription service. Furthermore, consumers are quick to cancel services if they fail to deliver a superior experience. This could be due to poor product quality, a lack of assortment of options or a lack of perceived value. Only about 45% of replenishment subscribers stay for at least a year.
Not only will subscription services and try-before-you-buy programs have to work harder to get and keep customers, but customers will have tighter budgets since many are purchasing items from several similar brands.
Staying Competitive
In today’s retail space, offering try-before-you-buy options can help retailers differentiate themselves from competitors. This service also helps retailers reach a young demographic interested in easy and hassle-free shopping. Shoppers aged 25 to 34 are the most likely to purchase clothing through this type of service.
As of now, nearly 20% of retailers have adopted the try-before-you-buy model, with 8% more planning to incorporate this type of service into their offerings this year. By 2019, nearly a quarter of retailers will join in. And it’s certainly not limited to fashion. Retailers specializing in everything from technology and sports to home décor are experimenting with these services. Only time will tell if this model will pay off long-term.