This year, for the first time, doomsayers are not predicting that the holiday season will be make-or-break time for the entire e-commerce industry.
Still, reaching that plateau does not come without some unsolved problems. The two major hurdles that have yet to be overcome — shipping and returns — could spell trouble.
Last week, Jupiter Media Metrix released a report indicating that online shoppers object to the shipping charges associated with shopping on the Internet. The research found that 63 percent of online shoppers are discouraged from buying products via the Internet because of high shipping costs.
That’s a powerful consumer statement. Combined with the public’s clear misgivings about the difficulty in returning merchandise, as well as consumer fears of inadequate online security, one can see that e-holiday 2001 does have some mountains left to climb.
With about five months to go before holiday shopping begins in force, e-tailers would be wise to step back and re-evaluate some of their ancillary policies right now.
Jupiter offers two valuable suggestions. Shipping should be based on the weight of the item rather than the value, and shipping costs should not necessarily yield a profit, but rather be built as a break-even element.
The first of these ideas is fairly self-evident. E-tailers must recognize that the public is savvy when it comes to shipping. Consumers know that the cost of shipping via UPS or other services is generally based on weight, the report pointed out.
As a result, there’s a disconnect between the customer’s knowledge about shipping costs and the experience of shipping from an online source.
Sacrificing profit from shipping is a trickier proposition, especially for those retailers who, from the beginning, viewed shipping costs as at least a small way to boost the bottom line.
Constructing shipping as a profit center was simply a bad judgment call on the part of online merchants. It is critical to respect the experience and intelligence of the public, and on this issue, the public has made itself clear.
Oddly enough, the other major hurdle facing e-tailers has to do with merchandise traveling the other direction — back to the seller.
A report issued by The Yankee Group earlier this year said that while Internet sales will triple by 2004, returns will quadruple. Further, Yankee’s research indicates that this year, total returns of online merchandise will swell to $11 billion.
A number of companies have made the mistake of viewing returns as a necessary evil, rather than a critical part of their business mix. It would behoove those e-tailers to begin taking the return issue more seriously.
Suffer Now, Not Later
First, returned items should be processed quickly and efficiently. If an item can be resold, it needs to be made available for resale as soon as possible. Defective items that can be routed back to the manufacturer should be processed immediately.
As with any retail business, it’s all about tight inventory control. Unfortunately, some online businesses sit on their returned items for an inordinately long time.
Additionally, pure-play e-tailers just getting started often underestimate the cost of handling returns. By some calculations, it costs a company four times as much to process a return as it does to ship a product.
Companies who do not plan for the cost of returns are likely to suffer.
E-tailers are walking a fine line trying to craft smart shipping and return policies. There is no such thing as a one-size-fits-all policy. Customer priorities may shift, depending on the reason for their purchase and the time of the year.
For example, the holidays always find hordes of last-minute shoppers whose absolute priority is getting items delivered before Christmas. For them, timing is everything.
Those who shop online as a leisure experience, however, may be more conscious of the cost of shipping. For them, there might not be any real rush to receive the item, and cost may be the priority.
No More Freebies
The only thing everyone knows by now is that free shipping of Internet purchases is probably obsolete. Those who did offer free shipping at one time were probably being subsidized by venture capitalists with deep pockets. Since that is now history, Web shoppers will rarely, if ever, see offers of free delivery again.
Raising prices to build in additional processing costs is not the answer. A combination of smart marketing, diligent inventory management and streamlined operations might be, however.
Now is the time for e-tailers to restructure their delivery and return processes in a way that will suit both the consumer base and the bottom line. After all, even if the holiday season won’t sound a death knell for e-tailing, those Web merchants who do not address shipping and return weaknesses now may not survive when the high-sales season rolls around again.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.