British reserve used to be thought of as the defining national characteristic. From a willingness to queue and an unwillingness to complain, the idea of the stiff upper lip remains firmly in the mind of many overseas observers. Wander online, however, especially into the social media forums frequented by the under-25s, and you will discover just how wrong this perception is (assuming it was ever really true in the first place).
Emotions are now freely - and firmly - expressed online, while a range of other British behaviours have also been altered. Take shopping, which had almost become a national addiction during the NICE decade of negligible inflation and continuous expansion. But while retail may now be enjoying a strong recovery - with sales up 3.4 per cent in 2013 compared to 2012 - it is facing a bewildering array of new customer habits. And my niece is a prime example of just how challenging these are to conventional retail business models.
Take finding a new outfit for a party. Not so long ago, my niece - let’s call her Peony to protect her identity - decided she had nothing to wear for a night out. Did she go to the nearest shopping mall, department store or even local fashion outlet? No, she headed straight to ASOS, thereby helping to fuel the 17.5 per cent growth in home shopping seen last year. According to the just-published 2014 Abacus Trends Report, this sector overall is heading for more strong growth, although weak brands in sectors like fashion are seen as at risk of failure. (You can find the full report here)
But that’s not where the real damage she is causing to retail was done. After all, the e-commerce boom has been going on now for nearly a decade. Instead, it is the way she found what she eventually wore - by buying three possible outfits and then returning the two she didn’t want.
Returns have always been part of both retail and home shopping and are routinely factored in to underlying business costs. Being able to buy an item in-store and then taking it back if you change your mind is a well-established behaviour and even form part of the promise which brands like Marks and Spencer make to shoppers. What is new is the scale of this activity. E-commerce has removed any sense of embarrassment which a British shopper might have felt by having to face a shop assistant in order to get a refund.
When all you need to do is put a dress back in a polybag and book a courier to pick it up, there is no longer any barrier to this multi-item consideration phase. For the vendor, deciding when to book a purchase as a genuine sale and bank the money is hard when, in theory, the refund from a return could pay for the next item which also gets sent back, and so on almost ad infinitum.
Add in the cost of handling returns, writing off damaged items or being unable to sell them because their fashion moment has passed and the already-narrow retail margin soon gets thinned yet further. On top of this, omni-channel retailers operating an integrated clicks-and-mortar strategy will struggle to know exactly what their in-stock and returned items position truly is. If you have ever tried to buy an out-of-stock piece of clothing one day and looked again the next to find it available, you’ll know just how dynamic this position is.
Do retailers simply have to swallow hard and accept this while pricing the costs into their model? Or could some constraints be introduced to limit the extent to which a shopper can return-and-churn in this way, much as retailers restrict how many items can be taken into a changing room in order to cut down on shoplifting? Would their customers accept such a step? Better ask Peony...