Consumers are searching for low prices and convenience offered by shopping online, with 20% of non-food consumer goods now being sold through online channels, according to a survey carried out by OC&C Strategy Consultants, consultancy.uk reports.
The delivery of the goods to customers, as well as dealing with returns, is creating issues for the industry – as well as its supply chain operators. Operating profit margins have fallen from 6% in 2011 to 2.5% in 2015 and may fall a further 1.5% if retailers don’t find a way of dealing with the spiralling costs as total online sales hit a projected 40% by 2025.
The research, involving more than 1,000 consumers, reveals that, by 2025, home delivery will be responsible for 30% or around GBP 69 billion of non-food sales, while click-and-collect is set to account for a further 10% or GBP 23 billion in sales. The number of in-store sales, the research highlights, will drop from 78% in 2015 to around 60%, or GBP 138 billion.
However, the cost of home delivery and click-and-collect are eating serious chunks out of the margins of retailers, as well as the delivery services used to ferry the goods to the customers’ door. The cost of home delivery can amount to between 5 and 23 times the cost of in-store purchases for small to large products.
The result of the increase in online purchases, and increasing logistics supply chain costs – for both delivery and processing returns – has resulted in operating profit margins, dropping off considerably for the UK’s top 10 multichannel retailers: falling to 2.5% in 2015 from 6% in 2011. By 2025, an additional 1.5% drop is expected as costs continue to spiral from among others the omnichannel revolution.
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