There’s no doubt that fast and free shipping and returns has become a customer expectation, largely due to the influence of Amazon. Most retailers have been forced to follow in Amazon’s footsteps providing free shipping and returns to their customers. As consumers, we have become expectant of this unbridled convenience.
In today’s world, customers have been completely insulated to the cost of fulfillment. It’s great for customer satisfaction, not so great for the bottom line. For apparel and shoe retailers, particularly painful, as customers have no reason NOT to order multiple sizes and then return what doesn’t fit or they don’t like. Processing and returning this inventory to a sellable state is extremely costly in terms of time and money. As a result, a strategy that was used to draw customers out of the physical store to e-commerce by promising uncompromising convenience, isn’t sustainable for many retailers.
The first casualties of unsustainable fulfillment practices can be seen in the floundering of flash sales sites like Gilt, Zulily, and others who have been squeezed by dwindling margins and pressured by shipping and high customer acquisition costs. This is not likely a problem that will stop with the flash sales retailers. Even Amazon is feeling the pressure, with shipping costs rising more than sales in Q3 of this year.
It’s why even the most disruptive retail start-ups like Warby Parker and Bonobos see brick and mortar as an integral part of their future according to a recent WSJ article. Digital intelligence firm L2 affirms that the physical store remains the cornerstone of retail because e-commerce alone just isn’t scalable. The cost of fulfillment is just too high to be sustainable for all but the biggest players, and even the Amazons of the world will face challenges.
The question is how long can retail sustain these current margin eroding practices?
At least part of the solution involves getting creative with leveraging brick and mortar to meet the expectations of today’s consumer.
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