On-line retail costly to run as shops

High transport and returns costs make selling on-line no cheaper than running a traditional shop said a retailer at ICSC’s European Research Seminar in Copenhagen.  Customers also spend four times more in-store than online, according to research, confirming the essential role of shopping centres and high streets in Europe’s economy.

This admission from retailers is welcome news for shopping centre investors and asset managers who have felt increasingly threatened by traditional retailers expanding on-line. Retailers are also boosting ‘click and collect’ facilities as they recognise that on-line shoppers often prefer to collect from a store, frequently adding to their purchases when they do so. Far from being uncertain, these findings show the shopping centre industry’s future holds significant new opportunities.

Jon Bjornsson, CEO of Danish department store chain, Magasin, which is significantly  expanding its multi-channel offer, said costs saved on rent were absorbed by significantly higher transport and goods returns costs incurred by online retailing.   “Around 2% of goods bought in our shops are returned, but that can rise to 25% with goods bought on-line, especially for online clothing retailers where customers may order two or even three sizes, sending back the ones that don’t fit,” he said.

However, a multi-channel retail strategy is essential for retailers whose customers expect to see their favourite brand or retailer everywhere they look, he added.

 There are other issues for retailers expanding their offer from traditional stores to on-line, including a higher expectation from customers. From changing stock seasonally, customers now expect new products five or six times a year.   Magasin’s Bjornsson added: “Customers expect the selection in an on-line shop to change faster than in the physical store.”

 However, many retailers are still only paying lip-service to multi-channel retailing, according to ICSC seminar speaker Dr Jonathan Reynolds, of Oxford Institute of Retail Management in the UK.   “69% of retailers claim to have a multi-channel vision and strategy, but only 29% of them have the technological and infrastructure capability to roll it out,” he said.

 ICSC Conference Chair, Kathrine Heiberg, CEO of specialist refurbishment company, Reteam, said: “Shopping centre industry professionals have spent the last few years in a state of uncertainty, a few even called the end of large scale retail development as they predicted a big consumer move online.   It is now clear that such a pessimistic attitude was way off the mark.   Far from facing the end,  shopping centres professionals are now looking at the huge opportunities that exist to make shopping centres real destinations, places for people and communities.   The digital dawn has opened up far, far more opportunities than it has restricted growth.”

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