Online shopping creates returns meltdown for retailers
New research has shown that while the UK online retail sector will be worth in excess of £42.7 billion this year, retailers face losses upwards of £9.4 billion due to the impact of increasing returns; a £1 billion increase year on year.
High street retailers expect an average return rate of 10 per cent, but research suggests that online shoppers return an average of 22 per cent of items purchased.
As the online retail market continues to grow year on year and online shopping overtakes the high street in terms of popularity for the first time, losses from online returns could easily surpass £10.5 billion by the end of 2011.
According to the study - from Stockshifters.com many retailers are unprepared to deal with this mountain of returned goods, and have no provision to generate revenue from this ‘secondary stock’.
The Department for Business, Innovation and Skills (BIS) has also launched a campaign to educate consumers on their rights when returning goods to distance sellers (online and mail order). Currently only a quarter of consumers are clear of their rights when making a purchase online, but as this figure rises, so too will the issue of returned stock and the negative impact it has on retailer profitability.
The research identified clothing as the product category where most online shoppers make returns, with books, music and movies ranked second. The top five categories were:
1. Clothing – 33.93%
2. Books, music or movies – 14.70%
3. Electronic equipment – 8.79%
4. Computing equipment – 5.35%
5. Home and garden furnishing – 2.93%
Harvey Sinclair, CEO, Stockshifters.com, commented: “The figure suggesting consumers return one in five online purchases is worrying for retailers, and I’d chance that the true figure is even higher. The retailers we work with have to deal with return levels in excess of 30 per cent for some goods bought online; a not insignificant volume and one which has the potential to undermine the positive growth of online retail.
“This trend is resulting in mountains of secondary stock left sitting in warehouses, which is unsuitable to be resold through the usual retail supply chain. Clothing may have been tried on or worn, security seals on electrical goods broken, and DVDs and CDs used and sent back. Historically these returned goods represent an immediate loss for retailers and manufacturers, and while a small number of organisations are now making efforts to unlock the value of these products, through the growing secondary goods marketplace, a large percentage are not projecting themselves against these losses.”
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