By Matthew Robertson, co-CEO, NetDespatch.
As we see the first signs of the heatwave dissipating and wetter weather coming in, this got me thinking about recent articles that I've read about the negative impact on productivity the balmy summer weather has had on office workers, with many preferring to work from home and not venture into heat-baked cities, over-crowded tubes and frenzied traffic jams.
A peak in weather, creates a peak in retail
From a retail perspective the British heatwave has certainly helped to give the high street a boost as consumers enjoyed shopping in air-conditioned shopping centres with UK retail sales reaching a six-month high in July.
As consumers rushed to purchase goods more appropriate for a heatwave, clothing and footwear sales rose at the fastest pace, according to a survey of 60 major retailers by the business group the CBI. The survey also found that department stores such as Marks & Spencer, as well as traditional outlets like John Lewis, had enjoyed their strongest surge in sales for 30 years. That said, John Lewis' own sales report for the first six months was far less positive and underpinned that while the hot weather might have given retail a bit of respite, overall the high street landscape is still declining.
A false sign of optimism?
In the first half of 2018 we have certainly seen plenty of instability in the high street with major names exiting, therefore I doubt it would surprise you to know that online shopping and ecommerce continues to go from strength to strength while High Street retailers spiral into decline.
Looking back over the years at the trends, what you might not have known is that between the turn of the millennium and 2009, online retail sales increased by some 5000 per cent, accounting for just under seven per cent of total retail sales for the year. Fast forward to present day and online sales now account for 17.4 per cent of the UK's total. In June, online retail sales grew by 17 per cent, like they have done for nearly every month since 2000. If we look at high street retail sales over that same period, retailers recorded growth of just 21 per cent and last month, in-store sales fell 1.7 per cent, the worst figure for 12 years. So whilst the peak in July was extremely welcome, the overall trend is still a downward one.
Why is online moving to the high street?
Interestingly though, what we are seeing is that many successful online retailers are now opening stores on the high street. This includes Amazon, who acquired Wholes Foods grocery chain last year and has launched checkout-free grocery stores under its own branding in the US, making no bones about its intention to expand its physical presence. Missguided, one of the new wave of online fashion retailers, has now opened two physical stores in London's Westfield and Kent's Bluewater shopping centres and other retailers like Boden and Joe Browns, which both started as catalogue retailers, have also branched into physical retail in recent years. Boden for example has a concession in John Lewis.
So why are they making this huge leap of faith when many traditional High Street retailers are struggling?
The simple answer is that even though millennials (who have grown up in an ecommerce world) like the convenience of online shopping, they also like the in-store experience but want it to be captivating and inspire them. As these online brands have made a mark via their ecommerce sites so they feel confident to take the plunge into the physical world and onto the high street. These retailers are clearly taking a significant risk, and one they will be acutely aware of given the increasingly frequent headlines of high street doom and gloom. However, their justification for leaving the relative safety of online retail is not simply to maximise their potential routes to sale, but more as a showcase for their brand.
A profound shift in consumer behaviour
For me this is interesting because it shows that to continue to grow the brand, the high street certainly has a place. However the experience needs to be radically different to what it has historically been. What is also interesting is to understand the impact this is having on the returns process. There is no doubt that we are in the midst of a profound shift in consumer behaviour. We want everything now and certainly when it comes to ecommerce and in particular services like click and collect, the legacy notion of ordering online and waiting in line to pick up at a service counter flies in the face of the "I want it now" mentality. To this point, over the years we've witnessed all types of retailers leveraging ways to engage with consumers through click and collect with lockers inside and outside of stores, in flat complexes and even sports stadiums where data on order pick up times shows shoppers love the flexibility of being able to pick up an order whenever they want.
Automating the returns process
To my mind, applying some of the same automation strategies to the returns process that work with click and collect is a major area of opportunity for retailers. Research that we did shows that while shoppers love the convenience of online shopping, what they hate about online shopping is the returns process, so this has to change. The same freedom to choose must be applied to the world of returns and there is increasing interest in automated returns processes that don't involve human interaction because it is easier for the retailer to execute and faster and more flexible for the shopper.
Millennial customers prefer to engage more with a digital interface than they do with humans
Therein lies a dilemma for retailers, especially those serving broad demographics, as they currently have to satisfy a range of expectations when it comes to how shoppers want to order, receive and return their goods. Some prefer the anonymity of buy online-pick up in store or another automated experience while other shoppers are more comfortable with a digital path to purchase that retains a human element.
Certainly what we are seeing here at NetDespatch is that more and more online retailers are automating the shipping process so that they can pick and ship products seamlessly without the need for human intervention. Returns are certainly an increasing area of focus as the volume of goods flowing back to stores rises along with the growth of e-commerce. It will be interesting to see the innovation in this space as retailers scrabble to meet ever-evolving consumer demands.