Value investing

MySize Addresses Returns Problem for Online Retailers

Smartphone applications are becoming increasingly ubiquitous with billion-dollar companies being created in short order, including big names like Facebook Inc. (NASDAQ: FB) and Snapchat Inc. (NYSE: SNAP). However, the next generation of billion-dollar smartphone apps may target both consumers and businesses, helping them address problems that negatively impact both of them - including online merchandise returns.

In this article, we will take a look at MySize Inc.’s (NASDAQ: MYSZ) innovative technology designed to solve a key problem facing online retailers - returns.

Problems with Returns

Shoppers are expected to return 30% of clothing and shoes bought online, according to Customer Growth Properties, which is twice the return rate of goods bought in a store. The core problem is that online shoppers have no way of trying on clothing and sizes vary widely between brands. Often times, online shoppers get around the problem by purchasing multiple items with plans to return at least some of them after trying them on.

According to The Retail Equation, merchandise returns accounted for nearly $270 billion in lost sales in 2013. Returned iPhones and iPads may be resold for upwards of 80% of the value, but lower brands and clothing may be worth just pennies on the dollar, says Optoro CEO Tobin Moore in a CNBC interview. Inefficiencies in the processing of returns accounts for much of the lost value that retailers observe even if the products are in good condition.

Moore further notes that the process creates billions of tons of waste each year, since retailers throw away 30 to 40 percent of goods that don’t make sense to send back through the reverse supply chain. The shipping of these products back-and-forth from consumers also means pollution from trucks and ships responsible for transportation. These problems have become worse in the age of e-commerce as consumers expect accommodative policies.

Innovative Solutions

MySize is a leading developer of proprietary smartphone measurement applications, including solutions to help online retailers and consumers. MySizeID uses a person’s body measurements and statistical algorithms to help determine correct apparel sizes when online shopping. The technology helps consumers ensure they are buying the right size and avoid the cost and complications of handling returns over time.

“MySizeID is our next generation measurement application for online clothes shopping,” said MySize Inc. CEO Ronen Luzon in a recent press release announcing the launch of MySizeID. “With TrueSize, the right size clothing at a store is recommended based on the measurements of clothes from the customer’s own closet. MySizeID takes it one step further, by using an alternative benchmark. It accurately measures a person’s body.”

The app leverages extensive research and development efforts including:

Anthropometric Research - The analysis of information pertaining to body measurements derived from a survey and the subsequent determination of correlations between body parts.

Body Measurement - The company’s proprietary algorithm that’s designed to measure body parts.

Retailer Size Charts - Technology that adopts a deep understanding of the size charts of retailers and the corresponding body-to-garment-size.

Consumers using the smartphone app simply move the phone from one hip to the other hip to come up with the right options for their body. By comparison, competing apps involve the use of a smartphone camera, which could involve some privacy issues.

MySize isn’t content with simply providing the app to consumers. The company is selling the app to online retailers who can build it into their ecommerce site. The retailer benefits by decreasing the return rate and providing happier customers with appropriately-sized products. MySize makes money incrementally, either as a percentage of sales that utilized the app or a small stipend per app use. The app is currently being tested on a trial basis with Trucco, a major online European retailer.

Looking Ahead

MySize Inc. (NASDAQ: MYSZ) represents a compelling opportunity within the tech industry that promises to reinvent the way consumers buy clothing online. As a win-win proposition for consumers and online retailers, the technology could not only help save billions of dollars per year in lost revenue but also eliminate waste and pollution associated with returns - which have become increasingly frequent with the growth in online shopping.

For more information, visit the company’s website or investor relations website.