How does cost pressure affect e-commerce? Monogo E-commerce News, 49
Christmas is fast approaching. Before they come, however, we have to get through Black Friday. One of the hottest e-commerce periods of the year. In 2023, online sales are forecast to be at least 20% higher than last year. This is not only a time of more sales, but also more costs. If you include returns, the pressure on e-commerce businesses starts to take on massive proportions.
The main components of an online shop's operating costs are deliveries, returns and customer service. Using a survey of the 100 largest online shops in Germany as an example, we can draw some interesting conclusions.
Free unlimited delivery does not exist
The times when customers could enjoy free delivery, completely unlimited, are almost over. Of the e-commerce businesses surveyed in Germany, only 5% declare free shipping. 50% of online shops charge for deliveries below the minimum order value. 45% say they charge for every order, regardless of the basket amount.
We can say that cost pressure has won out in this area. In the future, I would rather not expect a change. Charging a low but always some amount for delivery has become the norm.
Returns still free, but this too will change under cost pressure
There are some industries that particularly suffer from free returns. In fashion, customers often boast that they order more than they need online and then return what doesn't suit them. Or they order several variants of the same product (size, colour) and again, what does not suit they return. Because they have this right and these are the rules that online shops give.
On the one hand, in Germany, still 90 per cent of shops declare that they have a free returns policy. However, in other parts of Europe, the situation is already changing. H&M only offers free returns in Germany. Other countries already have a changed policy. From the UK, to France, Belgium, the Netherlands, etc., the fashion giant charges at least €1.
In the future, we can expect more brands to introduce a fee, or increases for returns. This is the inevitable consequence of massive scale. For example, in the UK in 2022, the value of returned goods in e-commerce reached a dizzying £7 billion.
Customers will slowly have to get used to paid returns.
Customer service, not when it's needed
Typical customer service hours are 9am - 5pm Monday to Friday. Normal working hours. But, they do not coincide with when customers are most likely to buy. 31% of German online shops are not available to answer customer queries during weekends.
The situation becomes very interesting when we look at the statistics for response times to email enquiries. On average, a customer in Germany has to wait 34 hours. One may ask oneself whether this is not enough time for the customer to either give up or choose another shop?
During Black Friday, customers are most likely to shop until 11 a.m. and then from 6 p.m. to 8 p.m. There is usually no customer service person available to answer the phone or reply to an email during this time. You might want to check during the upcoming trade holiday to see if introducing different customer service hours will help you sell more?
Other cost pressure factors
Let's return to free returns and free delivery for a moment. By taking over the shops' obligation to cover costs, it frees up customers to combine their orders and shop more prudently. But it has a direct impact on yet another aspect of business. Through huge volumes of returns, the environmental impact is gigantic.
With the work on emission restrictions in Europe, we can soon expect to see more visibility of the topic of the carbon footprint in e-commerce. It's a good idea to start preparing now, so that when the relevant law comes in, we'll have things sorted out so that we won't have another surprise cost in business.
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