E-commerce Irony
Although most people would think that high street retailers are suffering compared with e-commerce websites, changing consumer habits are showing the opposite effect.
A survey conducted by McKinsey showed that even in the most popular e-commerce categories, only around 10% of Chinese consumers stay online throughout the whole customer journey. For example, customers for consumer electronics tend to visit a physical store to seek advice and get a chance to see the product first-hand before purchasing. This could be said for a number of other categories, including clothing – where people are more inclined to try before they buy.
Expect the Unexpected
This has started to have an impact on e-commerce, with reports of the market starting to hit a plateau in some countries. In India, e-commerce sales saw an 11% growth in 2015, compared with a growth of around 30% in the previous year. Similarly, JD.com, China’s second biggest e-commerce has reported a steady decline in their growth rate. And it seems this decline was expected, since their revenue for the second quarter of 2016 was still within company forecasts.
If these consumer habits are replicated in other parts of the world, pure e-commerce players may be facing challenges in the future. In addition to that, most e-commerce companies are finding it hard to turn profits, having accumulated losses over years, aiming for scale to reduce logistics cost per unit. Such unsustainable business practices will eventually drive some of the pure players out of business; those that previously ate from physical retailer’s slice of the pie.
Click & Collect – The New Way to Buy
Many online retailers are putting themselves out of pocket by only charging a minimal amount, if anything, for delivery and ultimately failing to provide a good service. Returns, for instance, are very often not taken into consideration, resulting in a logistics cost of around USD 50 per order returned. Due to this, it is now becoming increasingly popular for high street retailers to reduce the logistics costs coming from their online orders by influencing their customers to collect their goods in-store. In addition, once these customers are in store, they are prone to impromptu purchases providing retailers an opportunity to up- and cross-sell.
Will this lead to the comeback of physical retail? Read more in our recent press release on the rebound of retail