The shifting sands of retail

 

There are signs of a re-balancing between online retail and physical stores as Asos posts its second profit warning in three months.

The rise of e-commerce was regarded by many as a nail in the coffin of the High Street because it was spared the costs of expensive rents and business rates, in-store staff and high energy costs.

However, in their enthusiasm, it seems that the champions of e-commerce may not have paid enough attention to some of the additional costs involved.

While prices may be cheaper online, there are some additional costs which are turning out to be significant.

Online retailers certainly reap some benefits from centralised warehousing as opposed to a High Street presence. However they have significant packaging and shipping costs, which are proving a burden when dealing with the issue of returns and who pays for them. The additional staff handling costs can also prove significant, especially when administering returns.

This is becoming a big concern for a volatile sector like fashion and clothing, where, for example Asos  in the UK returns amount to 39% and in Germany 58%.

A major issue is the size labels used on women’s clothes. Another relates to the difference between the item on a screen and the one that is received. I know several women who order many items at a time expecting to return most of them. They choose retailers with pre-paid return policies and often return as many as 90%.

There are two examples of retail outlets that have had consistently good performance even over the last few uncertain years: Next and John Lewis.

Both combine e-commerce and a High Street presence, but crucially, both have introduced a hybrid system, click and collect, where customers can order online but pick up their order in a store.

It will be interesting to see how the online retailers overcome the issue of returns.

Plainly High Street retail is not dead yet.

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