Politicians, journalists, independent and multi national retailers suggest believe that is how commercial life is for online operators( image of a sunlight over a green valley, seemed to be somewhat more positive than the images I could find for ‘beds of roses’ they all looked rather funereal) Stick it up on the web and it sells , piece of p……for them, what chance have us High Street retailers got…Special online taxes, a more level playing field are a couple of the more lurid suggestions.
It’s a bit rich coming from retail multiples especially the supermarket chains, who had an equally devastating impact upon the High Street, during the sixties and seventies. Some would argue that their impact was quicker and more devastating . Especially as the demise of the High Street was a direct consequence of their actions, rather than online purchasing being only one of a number of factors having a negative effect .
I approached this subject back in December ’17. Whilst the problems facing online operators that were around then, still exist, there are bigger problems today.
One of those problems, whilst mainly effecting clothing and shoes is consumer expectations. Or rather how the consumer has altered their behaviour because of those expectations. Returns within the shoes and clothing sectors have become such a big problem that it is impacting upon retailers conditions of sale. It is not just about apparel not fitting, or rather it is,but in a skewed manner. Consumers are buying two or three different sizes and only keeping the one that fits. ‘Obs’ you may say. But it is worse because of the increase in purchase by mobile, shopping is sometimes done by a half smashed consumer in a bar, realising 24 hours later they don’t want it. This don’t ‘appen in shops (does it? Please let me know if this is a frequent occurrence in your shop!)
Product returns and exchanges have been the nemesis of the direct-to-consumer industry going back to the mail-order catalog days. For products that are fit and/or fabrication sensitive (think fashion, intimate apparel, shoes) returns often exceed 30%, and rates north of 40% are not unheard of. Back in the good old days, while high return rates were definitely an area of concern, the fact that the customer often paid “shipping & handling” costs helped soften the damage to the bottom line. In fact, for some brands, shipping & handling was actually a profit center.
Today? Well, not so much. Forbes magazine 2018
The next biggie is online fraud.
It is hard to feel sorry for websites. But if you think about them as being a bit like shop owners, it is worth considering that 63 per cent of online merchants are struggling to keep on top of fraud attacks, according to research by payments processing firm Worldpay.
Some have had very public struggles. At the end of 2013, US retail giant Target had 40 million credit and debit card account details stolen by hackers. The upshot was it cost the company $162 million in costs not covered by insurance.
The chart above illustrates the rising rate of e-commerce card fraud in the U.K. upto the end of 2014. The number is now somewhat higher . Some may suggest that Stores suffer from theft. Yet there is a critical difference. Both the online retailer and their customer are victims. Yes, stores factor shrinkage(shoplifting) into their pricing but this is not comparable to the potential losses with online fraud. The additional effect is that the consumer can lose confidence with online purchasing. Most consumers don’t care a toss what is nicked in a shop.
The third problem are counterfeits . However I have posted about this before and I look at again in my next post. But the reality is that whilst all forms of retailing suffers from its effects, online it is insidious and a lot more difficult to monitor and pursue. You only have to read an audit by Apple in 2016 which showed that 90% of Apple accessories sold during that year were counterfeit(of course not all was online but I believe a major chunk was). If Apple struggle with the problem what chance does anyone else have?
The trouble with Beds of Roses and sunny valleys, is that eventually the roses wilt and clouds cover the sun. We have to be very careful how we approach the level playing field that bricks and mortar stores clamour for . The future of retailing lies with good e-commerce and good physical store retailing. With the emphasis on ‘Good’. We can’t go backwards and hope it will work out eventually.