So its been nearly six months since the close of the (drum roll).... second ever holiday online shopping season. How did the parcel industry do? Were we able to overcome the problems of 1999? Will the online shopping season for 2001 be better, worse or non-existent? Will the economic slowdown of 2001 affect online shopping? Who were the winners? Who were the losers? And, most important to those of us in parcel shipping: How did we handle fulfillment and the dreaded returns?
Well the returns, so to speak, are in. And clearly, the economic slowdown did not cause American consumers to spend less online in 2000. The number of online shoppers rose 23% to 49 million customers during the 2000 holiday shopping season. And they were spending more than they did in 1999. In fact, online spending was up 23% over 1999. According to the Boston Consulting Group, the average online purchase was $234, up from $170 in 1999. Overall, online holiday sales were 70% higher in 2000.
But it also became clear that consumers were well aware of the problems from 1999. A lot of consumers who considered online shopping decided against it. The Boston Group quotes research conducted in October 2000 showed 70% of the online population was planning to buy at least some holiday gifts online. But of that population, 27 million, or 22%, decided against it. The number one reason for hesitation or refusal to buy online was security of credit card information. But right behind the concern over security was the difficulty of unwanted items returns.
Those that did buy online were very cautious. The problems with fulfillment, timely delivery and returns caused a lot of shoppers to play it safe. It appears many consumers bought the same item from different sites online, hedging their bets so they were sure to have their gifts delivered by their deadlines. But, of course, having double- or triple-ordered the same item, guess what skyrocketed in early 2001? You guessed it, folks returns!
The bricks and clicks have a real advantage over the pure online retailers here. Not only did they have the infrastructure to handle distribution and delivery of items ordered online, they had a return system in place. And, it appears even cyberfanatics like the security of having a place to take back unwanted gifts. However, a lot of established retailers with stores nationwide or even worldwide missed the boat on this one. Only 60 brick-and-click merchants would accept returns of online purchases at their stores. Not a good policy. Wal-Marts option of using a free return label or returning products to their stores really paid off in 2000. Its online sales were up a whopping 640% over 1999.
But that hardly means online retailers dont have means of handling returns. Obviously, a real niche has opened in the market. There are already several new players: Donnelleys Return Valet, Swift River, FedEx Net Returns, UPSs e-Logistics are just a few of the players that have appeared over the last two years, ready to take on your returns.
Research indicates that e-tailers had better pay attention to returns. One survey of online shoppers showed that 42% would shop over the Web more often if the returns process were simpler. But neither returns nor up-front shipping and delivery are small items for online retailers. They are labor intensive and often a loss leader. Wal-Mart and Amazons open return policies no doubt brought shoppers and, more importantly, buyers to their Web sites. But they cost money Jupiter Media Mix found that 40% of e-tailers were losing money on shipping. Its simply not their area of expertise.
According to Peter Stanger, vice president for B2C e-commerce at The Boston Consulting Group, its only going to get tougher for e-tailers who arent prepared to handle fulfillment and returns. He states, Consumers expectations are continuing to rise. If online leaders can achieve a level of consistency of service and reliability that leading catalogers have achieved, there will be a boost in volume, confidence and value. More and more online businesses have come to understand that and are also happy to turn both returns and fulfillment over to those who know how to move things from here to there. The future looks bright for third-party logistics.
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