It is no secret that the past year has been a challenging time for UK retail. Declining profits, closing shops and changing consumer behavior has contributed to the worst year in retail since the global recession a decade ago.
Retailers such as Toys R Us, Maplin, New Look, Mothercare, and Homebase are just a few retailers that have faced administration due to declines of profits last year. Looking ahead it is anticipated to get worse, with expectations of more brick-and-mortar closures and hundreds of retail jobs to be lost.
Changing the mindset
The retail environment is changing rapidly. With sales declining on the high street retailers must adapt to consumer behavior across all channels in order to maximise profits and survive. Driven by changing consumer attitudes towards spending and the shopping experience, retailers are often forced to swallow expenses to provide a service that attracts and retains satisfied customers.
There is a growing consumer preference to spend more money on experiences rather than products. To adapt to consumer appetites, some stores across the UK are providing in store activities and entertainment to offer a shopping experience which simply cannot be found online. For example, Debenhams have introduced a gym in some of their stores and Selfridges in London recently entertained their customers with a pop-up boxing ring.
Last year mobile devices accounted for over half of online transactions (known as m-commerce); to adapt to consumer behavior, retailers are integrating technology into their operations. For example, H&M developed a smartphone app which helps shoppers navigate the store and scan products to see pricing information as well as any in-store offers.
Returns are a real opportunity
A shift towards online shopping has led to high consumer expectations to buy, receive and return in an instant. Retailers have not hesitated to meet these expectations with easy and convenient returns policies to encourage online spending. This has led to a total of £7 billion purchases being returned every year by UK shoppers.
New trends such as the Try Before You Buy model such as Amazon Wardrobe certainly attracts more customers but also creates a spike in returned items. The processing costs of returned items heavily impacts profit margin, placing further strain on retailers to offset as much loss as possible.
Some retailers are implementing stricter returns policies to set parameters which avoid detrimental costs. Others are continuing to provide returns policies which are most convenient to consumers and attract sales.
To cope with the costs of returns, some retailers are using other secondary channels to sell returned items that are not able to go back on primary shelves. An example of this might include a B2B liquidation marketplace to sell the stock to thousands of potential buyers. This type of platform, like the one offered by B-Stock, sets up an online auction dynamic where many buyers are competing for the inventory; this pushes prices up and enables retailers to maximise recovery.
By Ben Whitaker, EMEA director of B-Stock