First published in issue 3 of SOLVE magazine, 2021

From market squares and local shops to mail-order catalogues, department stores and shopping malls, new technology continues to make it easier for consumers to access an increasingly diverse range of goods from retailers’ online shelves. The latest and fastest growing trend in this evolution is fully mobile shopping on smartphones.

It comes at the same time the COVID-19 pandemic prevented many shopping trips. Researchers who study such trends say, however, the ecommerce shopping evolution, or revolution, was well underway before COVID-19 shut down high streets.

Professor Lisa Jack, from the University of Portsmouth’s Business School, sees smartphone ecommerce as simply a new way for people to continue to do what they’ve always done. “It’s just that technology keeps allowing us to do it in a slightly different way. The internet has replaced mail order, for instance, and it’s brought back home delivery.”

Professor Jack says there are predictions that, by 2040, about 95 per cent of sales will be facilitated by ecommerce, accelerating the financial burdens that bricks-and-mortar businesses face.

In the UK, for example, high street business council rates are 95 per cent higher than those paid by online-only stores for warehouses that tend to be in outer urban industrial areas.

Online-only stores also have a dedicated business model that includes consolidated stock handling and inventory control processes for purchases and returns. Companies such as Amazon also use highly efficient, automated warehouse systems.

Professor Jack says many bricks-and-mortar businesses have attempted to compete with online stores by adopting hybrid business models, but these are proving more costly than anticipated and are actually jeopardising business viability.

“Simply bolting a website and online ordering onto an existing business is not as simple as many people think, particularly for larger businesses with multiple stores.”

Hybrid headaches

Hybrid models include multiple purchase and return options, such as the popular ‘order online, return instore’. But many businesses often don’t have the necessary stock handling, inventory control or staff training in place to effectively manage instore returns.

In one recent project Professor Jack examined the proportion and costs of retail returns to businesses in Europe, the UK and the USA, and found many struggled to even identify costs related to returns.

Store-based purchases and returns traditionally run at eight to 10 per cent of sales, and returns are often incorporated as “the cost of doing business”, she explains. But add online ordering into the mix and these costs become substantial – and potentially fatal for a business.

“Returns for ecommerce sales average about 20 per cent. For special promotion ‘high days’ such as Black Friday and holidays, for luxury items and clothing, returns can be anywhere between 35 and 70 per cent of sales. The rate of fraud is also on the rise with the increase in online purchases, as there is greater anonymity in online shopping.”

For Professor Jack, there are also costs related to the broader impacts of policies that encourage wasteful practices or over-consumption that need to be factored in.

Consumers increasingly see free delivery and returns as part of a business’s competitive offering. Some businesses offer a subscription that provides unlimited deliveries and returns. But this encourages the purchase of multiple items with the express intention of making returns. Professor Jack says some items are so cheap they are not worth the cost of handling, and returns are just binned.

Consequently, she sees more packaging and more waste generated from increased online shopping, and an increased carbon footprint and traffic congestion arising from many more small journeys for deliveries to and from customers and stores or warehouses.

Simply bolting a website and online ordering onto an existing business is not as simple as many people think, particularly for larger businesses with multiple stores.

Professor Lisa Jack, University of Portsmouth

Sustainability question

She believes many customers also discount the personal cost of being available for deliveries or collecting online orders from a pick-up point, as well as repackaging and delivering returns. 

“For me, the question really is: ‘How far can online shopping go?’ At what point will people consider that it is actually a more effective use of their own time and effort to shop instore? At what point will businesses, or consumers, decide the impacts of current online shopping practices are not sustainable?”

She says these questions about the sustainability of business practices also extend to supermarket shopping, which is the focus of new research looking at the cost of unsold food.

Current business models require supermarkets to be fully stocked all the time and rely on customers buying more food than they need, which can generate food waste at home. She is investigating the significant costs incurred by stores just in handling and coordinating the disposal of unsold food, whether that is to charities, for stockfeed, or some other process.

Professor David Pickernell, who leads enterprise development research at the University’s Faculty of Business and Law, says brands and businesses that address these kinds of sustainability and ethical issues are seeing increased consumer support.

In parallel with the steady increase in online sales over the past 10 to 15 years, there has also been continuous growth in the consumption of ‘ethical’ products and services, such as organic or fair trade products and renewable energy.

Ethically branded sales have increased from £45 billion in 2010 to £98 billion in 2019, and this has continued to grow during the pandemic. 

“This branding is being used by the most successful retailers to survive or sustain themselves, or in some cases to grow, because they’re offering something which is different to the norm and giving you psychological value beyond the value of the product itself,” Professor Pickernell says.

His colleague Dr Matthew Anderson, who lectures in business ethics, says this movement reflects the momentum of other changes in society. For instance, more consumers are willing to reduce single-use plastic, with approval rates increasing from 33 per cent of people in the UK pre-COVID-19 lockdown, to 52 per cent after lockdown; and bicycle use has increased from 28 per cent pre-lockdown to 44 per cent of respondents post-lockdown.

For University of Portsmouth marketing researcher Dr Jason Sit, these trends feed into the ‘rethinking’ that people are doing about what is important in their lives in terms of material possessions versus experiences.

“Particularly among older people, they realise more clearly that there may be no ‘next time’,” he says. “They are after authentic experiences that connect with their identity and values. They also want to contribute to social movements that create a ‘greater good’ and their legacy for future generations.”

He points out shopping experiences that offer something authentically local and even inspirational have been missing from high streets that are dominated by cloned stores selling mass-produced national brands.

“They all sell the same thing, so you might as well buy it online.”

While online and mobile platforms are just tools to facilitate trade, what they increasingly offer consumers is a way to connect directly with authentic and unique shopping experiences and niche products or services that reflect their personal identity or values.

Dr Sit says his research has also found that authenticity for online consumers is not necessarily connected to decades of heritage or craftsmanship, which are attributes that many brands lean on. Authenticity is instead about accessibility and the ability of brands to respond quickly to changing consumer needs.

For the moment, he says, brands either online or instore that can tap into the renewed focus on wellness, health and vitality will do well, along with those tapping into broader social good movements that care for communities and care for the planet.