will ecommerce ever be profitable?
With the huge growth in consumers looking to shop online and via their mobile devices, many retailers are feeling the pressure to build-up their ecommerce. Their reluctance to do so is down in part to the knowledge that it is very difficult to run a profitable ecommerce business. The mainly variable costs are all borne by the etailer and the consumer will often return the goods – indeed return rates of up to 40% are not uncommon in some sectors. Consumers expect a great looking, easy to use online shopping experience, fast and free delivery, free returns and wonderful packaging. Often consumers buy multiple sizes or styles of things to try at home before returning them.
According to research, more than a fifth (22%) of bricks and mortar retailers choose not to sell online due to concern about the costs of managing delivery and returns – Barclaycard 2016.
Keen to offer consumers the experience and convenience they are demanding, many retailers are looking to new technology for answers. Whilst smart tech might help consumers choose more wisely, e.g. AI informing purchase decisions based on previous behaviour or fitting services based on consumer biometrics, all the time that the consumer bears none of the cost of returns it is unlikely to make much impact.
image courtesy of asos
Ironically a development that is making the returns process easier and less costly includes taking returns to physical stores and drop off points – lowering costs considerably by using existing supply chain infrastructure.
Retailers will continue to develop ecommerce if only in response to consumer demand, but knowing the costs of operating in the market will make their move into ecommerce more circumspect. New technology will drive browsing and purchasing behaviour and we will see more retailers looking to leverage physical stores to manage deliveries and returns. Could ecommerce be the saviour of the high street?