The high-end fashion industry is highly competitive, and customer satisfaction plays a crucial role in maintaining brand reputation and sales. For international labels selling online to EU and UK customers, the inability to reclaim duties on returned items has led to a surge in negative reviews. In this article, we explore the multifaceted impacts of these negative reviews on sales, repeat purchases, customer lifetime value, reputation, and the cost of acquiring new customers.
Impact on Sales
Negative reviews can significantly deter potential buyers. When EU and UK customers express dissatisfaction due to non-refundable duties on returns, it creates a barrier to purchase. Research indicates that 94% of consumers avoid businesses with negative reviews1. This aversion can lead to a direct decline in sales, as potential customers may opt for local fashion brands that do not incur duty.
Repeat Purchases and Customer Lifetime Value
Customer lifetime value (LTV) is a critical metric for high-end fashion brands. Negative reviews can erode trust and discourage repeat purchases. A study by Bain & Company found that increasing customer retention rates by 5% can increase profits by 25% to 95%2. However, negative experiences, particularly those involving financial losses like non-refundable duties, will significantly reduce customer loyalty, repeat purchase and lifetime value.
The average lifetime value (LTV) of a high-end fashion customer can vary significantly based on factors like brand loyalty, purchase frequency, and average spending per transaction. While specific data for high-end fashion customers in individual markets isn’t readily available, we can look at some general trends.
In the broader fashion and apparel market, high-end customers tend to have a higher LTV due to their willingness to spend more on premium products and their loyalty to specific brands. For example, in the luxury fashion segment, customers might have an LTV ranging from several thousand to tens of thousands of dollars over their lifetime12
Our simple LTV Loss calculator
To help brands better understand the LTV loss they can face from negative review we have put together a simple formulae to demonstrate just how significant this issue can be on their revenues.
LTV = AO x PPY x S
LTV = Life Time Value
AO = Average order value
PPY = Average number or Purchases Per Year per (regular) customer = PPY
S = Stickability, the average number of years you retain a buying customer
SuzieQT’s fashion label (example only)
Brand has an average garment cost of AUD $250 per item, with a free shipping threshold of $250. In this example, we have a customer purchasing 2 items which equates to:
AO = $500
PPY = 3 purchases a year
Stickability – label focused on 20 to 30 demographic. S= 4 years.
LTV loss for one customer - example only
500 (AO) x 3(PPY) x 4 (S) = LTV loss of $6,0000
Add the negative review Multiplier factor
Now add in the fact that the customer gives a negative comment about not being able to get their Duty and VAT back from SuzieQ’s on Trust Pilot or any other channel. That will be seen by hundreds if not thousands of prospective customers and you are multiplying the LTV loss of $6,000 X per missed customer.
Even if you miss out on only say 10 customers that is a loss of prospective earnings of over $60,000 in new revenue over the life of those customers.
So What is it Costing your brand – just plug in your own numbers to see how big an impact his could be having on your international sales.
Wider Reputational Impact
The reputational damage from negative reviews extends beyond immediate sales. High-end fashion brands rely heavily on their image and customer perception. Negative reviews tarnish a brand’s reputation, making it challenging to attract new customers. According to a survey by BrightLocal, 87% of consumers read online reviews for local businesses, and 79% trust online reviews as much as personal recommendations3. Therefore, a string of negative reviews can have a long-lasting impact on brand perception.
A study by the European Consumer Centre found that 30% of cross-border online shoppers in the EU experienced issues with returns, leading to negative reviews and decreased trust in international sellers.
Cost of New Customer Acquisition
Acquiring new customers is already a costly endeavour, and negative reviews exacerbate these costs. The average cost of acquiring a new online customer in the high-end fashion sector can vary significantly, but it generally tends to be higher than in other e-commerce sectors. For example, the average customer acquisition cost (CAC) for e-commerce businesses is around $701. However, in more niche markets like high-end fashion, this cost can be substantially higher due to the need for targeted marketing and premium branding efforts.
In the luxury fashion segment, CAC can range from several hundred to over a thousand dollars per customer1. This is because high-end fashion brands often invest heavily in personalized marketing, influencer partnerships, and exclusive events to attract and retain their clientele.
In closing
Negative reviews stemming from non-refundable duties on returns can have a profound impact on Australian high-end fashion brands selling to EU and UK customers. These reviews affect sales, repeat purchases, customer lifetime value, reputation, and the cost of acquiring new customers. Addressing these issues by solving the reclamation of duty and through transparent returns policies and improved customer service is essential for maintaining a positive brand image and ensuring long-term success in a market with more than 500 million.
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