From the explosive growth of e-commerce to heightened pressure to meet consumer expectations of relaxed return policies to increased buyer remorse, the retail sector continues to remain volatile and unpredictable. As we’ve seen this year with the closure of BHS, even the largest retailers are not safe, whilst the fluctuating value of the pound following the EU referendum has put extra strain on the industry. The following are the predictions for the retail sector in 2017.
1) E-commerce will take centre stage
One of the most noticeable trends from 2016 has been the continued growth of e-commerce, which is set to gather pace in 2017: online sales are expected to rise 15 per cent. This growth reflects how consumer attitudes to retail are shifting: consumers are moving away from the need to touch and try products on before they buy in favour of the convenience and autonomy of the 24/7 shopping experience.
2) Retail infrastructure will feel the strain from rising returns
Estimates show that returns cost UK retailers £60bn a year, £20bn of which is generated by items bought online. With online sales expected to grow significantly in 2017, so too are the amount of returns retailers will receive; this is due mostly to a combination of buyer’s remorse and increasingly relaxed return policies to satisfy consumer expectations.
While customer convenience will drive loyalty, it also creates additional financial and logistical stress. As the proportion of online purchases increases, so will the cost of processing a greater number returns. Even greater pressure will be placed on the existing dynamics of many retail supply chain operations, especially in terms of how they handle these returns, many of which can’t be put back on the virtual shelves.
3) Rising expectations for customer return policies
The growth in multichannel retail is also likely to contribute to the growth in returns. Being offered more options when it comes to how and where consumers shop, as well as how and where they bring purchases back will become the rule in 2017. It’s no secret that the easier it is for consumers to bring back their purchases, the more likely they are to do it: around 62 per cent of people say they are more likely to shop from a retailer’s e-commerce site if they can return the item(s) in-store. It’s not just the smaller, less expensive items that are liable to be returned either.
Around two per cent of people stated that they would purchase a product online costing over $1,000, without seeing it first, if they were able to return it for free rather than just 10 per cent of people if returning it incurred a charge. As returns are made easier and cheaper for the customer, the amount of high-cost products coming back to retailers is likely to rise alongside the less-expensive items.
4) Free returns as standard
The retail landscape is extremely competitive; free returns have become - and will continue to be - the rule in retail, as they drive customer loyalty. However the cost of this, which is in the tens of millions, has to be offset, otherwise cashflow stability is put at risk. As free returns become standard, retailers will need to review the programs they have in place to manage them, particularly the returned stock which cannot be resold through the primary market and is therefore slated for liquidation.
5) Competition will grow within e-commerce
The competition in e-commerce is already cutthroat and as more businesses (including brick and mortar retailers) launch dot com platforms, it will only intensify. Establishing an efficient supply chain is one - very important - way to remain competitive; this includes what happens to any products that are returned, also known as the reverse supply chain.
E-commerce brings extremely high return rates so having a program in place to cost-effectively handle those returns is crucial. This is especially true for returned merchandise slated for liquidation: retailers should look to leverage liquidation programs that recover the maximum amount of money for the merchandise.
6) Delivery services will need to improve
In order to keep up with competitors in 2017, increasing numbers of e-retailers will begin to offer a variety of delivery options, including free or reduced rates for two-day delivery (to compete with some of the well-known e-commerce giants). What’s more, major e-commerce retailers will broaden their scope of same day delivery options.
Establishing convenient and cost-effective delivery options will drive customer loyalty, but it will be at the great expense of the e-retailer. Subsequently, it will be important for online retailers to look for ways to offset the cost of “free shipping and returns,” which will be expected by many consumers.
7) Retailers will adopt technology-based solutions to shift unwanted stock
Technology-based programs that bring efficiency to the handling of returned and excess stock will mean the difference between winning and losing in 2017. Utilising online auction B2B liquidation marketplaces that can be customised, integrated, and scaled based on a retailer’s unique inventory needs, allow retailers to find profit in returned products, without relying on middlemen or liquidators who take a cut for themselves.
This type of solution makes it possible to have thousands of secondary market buyers compete for inventory versus negotiating with a handful of brokers or liquidators offline, and turns liquidation into a strategic asset that will benefit the retailer – and only the retailer – into 2017 and far beyond. The retail marketplace continues to be volatile and the reality is that even the biggest and most established brands are not safe from the risks of insolvency.
Cashflow stability has never been more critical and so as businesses inevitably will make their returns policies more convenient for the customer, they must find ways to offset the costs to the business of doing so. By increasingly looking towards technology-based solutions which can help them recover quickly process and dispose of unwanted stock in a way that delivers the maximum return to the business and in the quickest possible time.