The State and Future of Online Retail

This past year and a bit has been a torrid time for online retail. Distributors have had to endure all manner of supply chain issues as well as regulatory changes that came out of Brexit – and then on top of it all, a global pandemic and lockdown restrictions.

So, what is the current state of online retail? And what can you expect things to look like after the pandemic?

The Pandemic Fast-Tracked the Growth of Online Retail

Before the pandemic, in February 2020, online retail sales in Great Britain made up 19.1% of all retail sales. There had been a steady growth to this point over the previous five years, with an average annual rise of around 1.5 percentage points.

But the pandemic saw massive growth of online sales. In in November 2020 and again in January 2021, that proportion peaked at 36.3% – nearly double the previous figures. This was of course due to lockdowns and the restrictions placed on the opening of certain shops. When the population was not able to visit the shops, they were forced to buy online.

Online retail’s share has declined since then as restrictions have progressively eased this year. The latest figures – for May 2021 – show the rate at 27.3%. This is still considerably higher than February 2020, and while it may drop a little more still over the coming months, the indications are that the pandemic has accelerated the growth of ecommerce.

Some Sectors Were Affected More Than Others

Grocery saw a massive boost to online sales as a result of people self-isolating due to illness or simply preferring to have their shopping delivered. Google searches for “supermarket delivery” spiked more than sixteen-fold in March 2020 over the previous month as people rushed to secure delivery slots from their preferred retailers. The sector was also aided by the closure of restaurants, pubs and other hospitality venues. Consumers switched instead to in-home drinking and sales of alcohol soared during the early months of the pandemic, seeing us buy an additional half a billion litres of it.

While the sales increases were no doubt welcomed, the sky-high demand saw many supermarkets struggle to ramp up quickly enough to cope with the surge. Such a rapid swing away from in-store to online was difficult for many to accommodate.

Many other markets saw a decline in their online sales. Clothing and footwear, for example, suffered a drop in internet sales. This only compounded the sector’s problems, as shops were closed for much of the time too. When purchasing these goods online, it is impossible to try before you buy, which puts many people off buying online in the first place. And with much of hospitality, leisure and social interaction off the cards anyway, a spending spree for a new outfit was not top of many priority lists.

Buyer Behaviour Changes Persisting in 2021

The pandemic has brought about a shift in buyer behaviour, precipitating a greater desire to shop online. A fair proportion of the population may well remain hesitant about in-person shopping until the pandemic has become a more distant memory. But even so, as more consumers have been forced to buy online, many will have been persuaded that it is a viable option for them and will continue to choose it.

Non-store retailing – which relates to purchases attributed to retailers with no physical stores – rose at the beginning of the pandemic from a fairly steady level. There have been small variations, but the jump has persisted at a similar level since May 2020. This is another indication of the growth in acceptance of internet shopping.

 

Non-store retail sales volumes have risen over the pandemic
Non-store retail sales volumes have risen over the pandemic

 

This was backed up by a Europe-wide survey conducted by online payments platform Checkout.com. It found that 74 percent of consumers had no intention of reducing their amount of online shopping, despite now being able to visit the high street once again.

Increased Rate of Returns

When you buy online, you can only be certain that you are happy with what you have bought once you receive your purchase. When something doesn’t fit correctly, or isn’t as expected, you need to return it.

The rate of returns is higher for online purchases. The 2020 IMRG Returns Review reports that around 10% of fashion goods bought in-store are returned. But for online sales, this rises to 25%.

With increased ecommerce due to the pandemic, this has seen returns increase even more. According to the BBC, “Rebound Returns, which manages about 40 million returns transactions a year, saw its global volumes shoot up by 63% during the pandemic.”

The Future of Online Retail

It’s yet to be seen how in-person retail might bounce back once all restrictions are lifted later this month. It’s likely that certain sections of society will continue to be fearful enough that they will not want to go shopping as often – or at all. This will keep online sales higher than they were.

But we don’t yet know if the high levels of online grocery shopping will decline. Perhaps as people begin to go back to the office, they will shop in person more – for food and for other goods.

What Retailers Can Do to Succeed

Retailers that have not yet sorted out their ecommerce strategy and supply chain technology will be left behind. If you are using old systems or incorporating manual processes into your operations, then you will not be able to keep up with future demand for online shopping.

To improve sales, you also need to get more personal with your customers. You can improve personalisation using a single set of customer and sales data. Having disparate systems for finance, your website, and your stock management just doesn’t allow you to provide the level of service needed to compete. Unifying your web store with your warehouse management and financial systems gives you better control of stock and fulfilment, helps you understand buyer behaviour better, informs your decision-making and means you can personalise customer offers.

To compete well, retailers will need to ramp up delivery speeds and also offer greater delivery choice. Customers want their goods quickly and want to get them in a way that best suits them. Online retailers need to offer alternatives, such as in-store collection, delivery to various pickup outlets or even kerbside deliveries.

Encouraging loyalty through repeat purchases will also keep you competitive and stop your customers turning to Amazon and other price-driven retailers. But you need to innovate to sell more. Perhaps you can bundle products together, or maybe you can introduce a different business model, such as subscription options for your products or services.

Finally, an optimised reverse logistics process is vital. Customers want the returns process to be quick, easy and free. But the reverse logistics operations are often sub-standard and disjointed. Streamlining your systems and delivering accurate, frequent notifications helps give customers greater confidence in your business.

 

If you don’t have an ecommerce presence, or want to improve your existing set-up, we can get you up and running with an integrated webstore, financials and distribution management in just a few months. For a quote or free business consultation, book an appointment or contact us today.

 

 

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