In the Operations Value Chain, we assess how effective Top500 retailers are in putting their wares n front of as many people as possible
When retailers sell at scale, they cut the cost to them of each product, making their business more profitable. The primary KPI for the Operations Value Chain is profit per order, reflecting this need to win more customers in order to cut the cost per sale of their retail operations. The RetailX research on which this value chain is based is about assessing the ways in which retailers engage with as many shoppers and potential shoppers as possible. That’s about using stores to raise brand awareness, offering convenient delivery options, whether that’s offering collection from a wide variety of points, or delivering as quickly as possible.
Findings are grouped through two questions:
• How do Top500 retailers reach as many customers as possible?
• How do retailers use convenient delivery and returns options to make it more likely that shoppers will buy?
QUESTION ONE HOW DO TOP500 RETAILERS REACH AS MANY CUSTOMERS AS POSSIBLE?
Retailers reach more customers when they have both more shops and a large number of collection points.
Among Top500 retailers, the average brand or retailer has 104 shops – nine more than last year – and the median – or mid-point – retailer has 17 (-1). Supermarkets have the most stores, at a median of 477, giving them both reach and brand awareness. Next are DIY and trade equipment retailers (176) and retailers selling maternity and children’s products (100). At the other end of the scale, the median marketplace host has no stores, while the median consumer electronics retailer has one.
Within that total number of stores, the median Top500 retailer has 10 shops, one more than a
year earlier. The median brand has 15 shops, while fashion retailers have a median of 13 and homewares retailers a median of 10.
Retailers have an average of 8.5 shops that are operated on a franchise basis, while the median retailer doesn’t have any. They have an average of five concessions, while the median retailer has none.
COLLECTION
Collection is a useful way to bring multichannel shoppers into a store, so having more points where they can pick up their online orders boosts the convenience for shoppers as well as the likelihood that they will also make additional purchases while instore. The average retailer offers collection from 1,300 pick-up points, which may include stores as well as third-party pick-up points. That’s 11 more than last year, while the median retailer offers collection from 110 (-43). Multi-sector stores tend to have the most collection points – the median retailer in this category has 986 – followed by retailers and brands selling consumer electronics (389), DIY and trade equipment (300), and flower and gift retailers (205). At the other end of the scale, marketplace hosts offer collection from a median of 33 pick-up points.
Fewer than 1% of Top500 retailers have their own instore collection lockers, a figure unchanged on last year. Having branded collection lockers can boost the physical presence and convenience for online retailers. Marketplaces (5%) supermarkets, multi- category retailers and retailers selling DIY and trade supplies and maternity and children’s products (all 3%) operate lockers at a slightly higher rate.
QUESTION TWO HOW DO RETAILERS USE CONVENIENT DELIVERY AND RETURNS OPTIONS TO MAKE CUSTOMERS MORE LIKELY TO BUY?
A combination of delivery that is either always free or free above a minimum order value, with easy and convenient returns, is likely to lead to relatively high levels of sales since barriers are removed. Given that there’s a statutory right to return an item within 14 days, it’s likely that making it easy to send something back will boost sales, since most shoppers will not return their online orders. We look at how Top500 retailers deploy the tactics that are likely add value through operations.
FREE DELIVERY
The proportion of retailers offering free delivery on all orders has fallen from 20% last year to 18% this year. More than a third of retailers and brands selling consumer electronics (37%) and jewellery (35%) continue to deliver all orders for free. Less than 1% of those selling maternity and children’s products and flowers and gifts do so.
FREE DELIVERY WITH MINIMUM SPEND
More than half (+1 percentage point (pp) to 51%) of retailers now offer free delivery when retailers spend a minimum amount, with retailers selling maternity and children’s products (82%), hobby supplies (73%)
and cosmetics (64%) most likely to do so. Marketplace hosts (29%) and those selling flowers and gifts (34%) are least likely.
PREMIUM DELIVERY OPTIONS
Premium delivery options cost shoppers more. The decision that retailers and brands make is whether offering options such as same-day and next-day delivery will add value to their businesses – and for their customers – or whether it will have an impact on profit margins, especially when next-day delivery is offered as standard or even for free. As the chart shows, a small minority of retailers offer same-
day delivery, while there’s a declining trend in the proportion that offer next-day delivery.
RETURN VIA PICK-UP FROM THE HOUSE
6% of Top500 retailers will organise a courier pick-up from the house for unwanted items. That’s the same as last year, with retailers selling consumer electronics (18%), homewares (13%) and multi-sector retailers the most likely to offer this. But fewer than 1% of retailers selling maternity and children’s products or hobby supplies offer this service.
RETURN VIA POST
The post remains the most commonly-supported channels for returns to be made, with 83% enabling shoppers to put an unwanted item in the post or return it to their local Post Office. Most fashion retailers (92%) offer this option, as do 90% of those selling cosmetics or sports and leisure equipment. But less than half (48%) of supermarkets enable this.
RETURN FEES
Where return fees are charged, the average Top500 retailer charges £13.10 (-18p) to customers who are returning an item, while the median retailer charges £7, the same as last year. Homewares retailers charge the highest fees, perhaps reflecting the fact that some homewares products such as furniture are larger
and require more capacity to return – at a median of £7.17, while the median brand charges £5.63 and the median fashion retailer – selling products that are more easily posted – charges £3.19. Charging a returns fee may discourage shoppers from buying in the first place but it is also more likely to mean that retailers can maintain their profit margins and charging a fee may also reduce levels of returns.
The Operations Value Chain analysis comes from the 2023 RetailX UK Top500 report. Download it here to see the graphics and list of leading retailers and brands in this value chain, as well as this year’s full Top500 listing.
