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eCommerce Could Be Growing Too Fast For Retailers To Cope

  • Written By Marcus
  • Posted March 29, 2016
  • 2 minutes Read Time

Today’s consumers looking to find low prices and convenience are heading more frequently to eCommerce, with 20% of non-food consumer goods now being sold via online shopping. The delivery of the goods to customers, as well as dealing with returns, is creating notable difficulty for the industry and its supply chain operators too.

In the last four years, operating profit margins have fallen from 6% based on 2011’s figures, to 2.5% in 2015. These figures could well be set to fall a further 1.5% if retailers don’t find a way to overcome the spiralling costs as overall online sales reach an estimated 40% by 2025.

Digitalisation, the creation of omnichannel shopping experiences, and the benefits of the aforementioned have been praised in a vast range of reports in recent years. The accessibility of buying online, teamed with the increase of digital shopping channels, has resulted in the UK online market growing progressively, and now makes up around 20% of total non-food consumer goods sales.

Many of the online purchased goods require shipment, in one form or another, to customers. The development of the digital shopping experience and all that encompasses it, including the transportation of goods, is not expected to stop over the next ten years. The research by OC&C Strategy Consultants revealed that by the time we reach 2025 home delivery will be accountable for a third (30%) or roughly £69 billion of non-food sales, while the hugely popular click-and-collect service is set to be accountable for a further 10%, in monetary terms equating to roughly £23 billion in sales. The research from OC&C also points out that the quantity of in-store sales will decrease from 78% – recorded in 2015 – to around 60%, or £138 billion.

This growth is said to be coming at a cost and many retailers will need to be aware of this to avoid its potential perils. It’s been stated that the cost of home delivery and click-and-collect are now consuming considerable chunks from the margins of retailers. That on top of the delivery services used to transport the goods to the customers’ door means making a profit is becoming increasingly more difficult. This has led to calls from experts – including Magento agency teams – for online retailers to be aware and account for the fact that customer expectations, and wallets, are now not making up for the costs incurred and therefore, many companies will have to adjust accordingly to counteract this.