The fate of the traditional high street remains uncertain in hardened economic times, with consumer shopping habits continuing to turn to ecommerce as a means of purchasing both necessary and luxury items.
As shopping habits evolve, so do the channels that customers return to time and time again for their product of choice. In a year that saw social commerce boom, and channels like Instagram and TikTok taking centre stage in how customers choose to shop, consumerism through ecommerce has developed even further and looks set to outstrip the high street in the year ahead.
Ecommerce by its very nature offers more choice and is now being impacted by the rise of trends. As an example, in the last year ‘recommerce’; the reusing, reselling and renting of clothes has generated almost £7 billion for the UK economy as customers embrace sustainable habits.
With retail habits evolving and new trends becoming viable ways to shop, Jamie Saucedo, SVP, business operations at PFS now part of GXO considers what does the year ahead look like for ecommerce and order fulfilment?
The digital retail experience
Channel strategies will be challenged next year, as social commerce booms and consumers continue to be engaged via a plethora of channels, therefore making it vital for brands to drive consistent messaging across them. With more choice comes more expectations of engaging with a product in the same way both digitally and physically. By harnessing data to understand where the consumer is researching and where they are converting, and then being able to deliver a personalised experience in each channel is critical to driving sales.
This is something that is done particularly well in the health and beauty market, with the likes of Charlotte Tilbury embracing immersive marketing and creating a digital retail experience. The virtual store experience and branded ‘world’ is the primary focus, and the product is secondary. AI and predictive analytics will play an increasingly important part in establishing personalised experiences by their ability to predict trends based on commonalities across consumer groups, how brands can best connect with them and how they can deliver content in a way that’s meaningful.
Economic impact vs income and spending
As inflation starts to moderate, discretionary income will continue to be impacted. Data is saying inflation is tapering off, but consumers say eggs and milk still cost too much. 2024 will see brands being hyper-focused on what is uncertain for the upcoming season, whether that is a cost of living crisis or an increase in household bills that might impact the consumer.
To counteract this, the supply chain will need to moderate in order to make sure inventory is balanced in both retail stores as well as ecommerce, so as not to create a Profit and Loss (P&L) drag and ensure brands have inventory in the right place for where the customer is. When the time comes to convert an online sale, it has to feel seamless. While consumer focus continues to be placed on value and looking at the best price, retailers will need to try and balance value with basket size, offering discounts or free products, or developing their strategy around free shipping. They will do it in a way to intentionally drive incremental basket size to really protect the margin side of it, utilising ‘buy more, save more’ incentives both in a retail store or on a website.
Primarily for ecommerce, a further shift will take hold that continues to be driven by value but will see consumers starting to care less about the speed of receiving their product, versus the predictability of exactly when they will receive it. We could see ‘three to five business days’ disappear with exact delivery days becoming the new norm, even if that means slower delivery .
The physical and e-outlet vs. recommerce
The theme of sustainability, vintage items and apps designed to support this trend are on the rise. Recommence is now a key focus for any large retailers in both Europe and North America because it solves two very important problems. The first is the intense pressure on sustainability in the apparel market in general. The second is managing returns and the impact it has on sales. Returns are one of the largest P&L aspects a brand must navigate and overcome. This lends to an opportunity to marry the two in a unique recommerce experience that delivers the objective of minimising waste.
There’s still discovery around what should be marketplace versus owned in the space and whether brands have enough customer attention to effectively drive recommerce in an owned channel rather than cannibalising new sales on the product. Ultimately, recommerce is driven by the consumer. There is a newer generation going against fast fashion, and instead, advocating for the global impact purchasing clothes has from a sustainability perspective.
The returns model
Alongside this, we’re also seeing a shift in how retailers approach returns which will carry through to the new year. Returns requirements increasingly vary from one retailer to another and consumers should no longer assume they have an extended return period. For example, there are apparel companies that now require returns be made within seven days of delivery. This process is ultimately designed to get the unit back while it’s still in a sellable state before it hits a markdown cadence, acting as a margin protection programme. As 2024 approaches, we will continue to see significant focus on returns in the apparel market to solve the challenge of getting an item back too late and then taking it to markdown.
Whilst the high street and its growth remains unknown, it is safe to say that the rise of ecommerce and social commerce will continue to take hold of retail in 2024. The year ahead offers a prime opportunity for brands to get ahead of the competition, as long as they plan ahead and prepare for factors that impact customer spending and continue to stay nimble and keep the customers’ needs at the front and centre of their business model.
Jamie Saucedo, SVP, business operations at PFS now part of GXO