Amid the retail disruptions of the pandemic, consumers began shopping online more than ever before. But escalating e-commerce sales are not solely a positive for retailers' profitability.
In AlixPartners and Sourcing Journal's recent industry survey: "2021 Fashion in Focus: Investing in a Future Forged by Adversity," respondents were largely split on whether the growth in online sales had an accretive or dilutive effect on their business, and a number were unclear on the impact. Serving a customer in store has a different cost structure than fulfilling online orders, and the labor, operational and other expenses for the latter can add up. This makes it more difficult to calculate the actual net financial result of digital sales, explained Bryan Eshelman, a managing director at AlixPartners, in a recent conversation with Sourcing Journal founder and president Edward Hertzman.
"It is a hard, tangled web of costs and activities to untangle and really truly understand," said Eshelman.
For legacy retailers, e-commerce should not be a standalone entity, but rather an integrated part of a cross-channel experience. And in-store and online channels have mutually beneficial effects on each other in driving sales and shopper convenience. "What's certain and universal for all retailers is that e-commerce as a component of the business is no longer something that they can consider separately from retail, as a so-called 'largest store in the chain' or other ways that retailers have thought about e-commerce before," said Eshelman.
Along with home delivery, omnichannel operations took off to keep up with consumer demand for easy, fast and contact-free shopping. Services that grew during the health crisis—like curbside pickup, ship from store and more—are not slowing down. The survey indicates more than two-thirds of respondents foresee buy online pickup in store (BOPIS) penetration rising.
Eshelman advised listening to shoppers' demands to determine which services to prioritize, adding that sometimes consumers care more about accuracy of fulfillment information than speed of delivery.
"Really understanding what their consumers want...needs to be first and foremost in where to make investments to sustain those different services or perhaps push them into the background a little bit," Eshelman said.
Listen to the full episode to discover:
- How to lessen the financial burden of returns
- What department stores can do to retain their relevance in a DTC world
- How to calculate the true value of physical store fleets, and the varied purposes stores can serve beyond transactions
- Why some publicly traded retailers are spinning off e-commerce from brick-and-mortar operations
This is the second episode in a three-part podcast series. Click here to listen to episode one.
Originaly published by Sourcing Journal, 16 November 2021.
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