1) Returns

Ecommerce sales result in returns far more frequently than in-store purchases, due to customers receiving damaged goods, items of the wrong size (for clothes and shoes) or simply the customers changing their minds. In the midst of an ecommerce boom, therefore, the relative volume of returns has also increased, putting businesses under pressure to efficiently manage a high volume of returns.

The way that businesses are expected to handle these returns is also changing, with 80% of shoppers now saying that they prefer retailers that offer easy return policies. This places the onus on the retailer to deliver a seamless and efficient return process, which can be both logistically challenging and costly. According to one US source, returns can cost businesses up to 66% of the original item’s price, even when the item is returned in good condition.

This has reopened the thorny debate about whether or not online retailers should charge for returns, with some retailers in the fashion sector now charging return fees in a bid to curb excessive return rates. The thinking behind this is to encourage customers to think twice before ordering products they are unsure about, potentially reducing the number of returns. The flipside of this is that charging for returns could negatively impact the customer experience and potentially deter shoppers – especially if they are already used to free, no questions asked returns policies. Changing an already established returns policy could also risk alienating loyal customers.

2) Evolving customer demands

One of the biggest challenges for UK online retailers in 2023 appears to have been evolving customer demands. According to Growth Engineering, customer expectations and shopping habits have been changing rapidly throughout the year, making it challenging for retailers to keep up with what consumers want. Bargain-hunting, panic buying, and reduced disposable income due to the cost-of-living crisis have all impacted brand loyalty among consumers, making it more difficult for retailers to secure repeat business.

At the same time, customers generally expect more from their online retailers than they did previously, with many demanding free and fast delivery, next day or same day delivery options, and a no quibble return policy as standard – even from independent retail businesses.

Customers are also becoming more conscious about sustainability and ethical business practices, adding another layer of complexity to meeting their demands. Ecommerce businesses need to ensure that they are transparent about their operations, including their supply chains and the environmental impact of their products, including their packaging choices.

3) Digital transformation

Another notable challenge for ecommerce retailers is the so-called digital transformation, in which businesses of all sizes have been required to adapt to new online technologies and integrate them into their operations simply to stay competitive. This includes implementing advanced data analytics, marketing automation, and stringent cyber security safeguards in order to handle large amounts of sensitive customer data while processing online transactions. While innovations in technology and the digital transformation have been largely beneficial for the ecommerce sector, keeping up with and integrating these new techs into existing business models can be expensive, putting investment pressure on small businesses at a time when many are under pressure to cut costs and rein back on spending.

4) Breakages

Breakages continued to be a bugbear for UK online retailers, with overburdened supply chains being one of the biggest causes of products arriving broken or damaged. Changes in consumer behaviour, including an explosion in mobile commerce, social commerce purchases – i.e. direct purchases through Instagram – and an increase in marketplace selling have all increased the pressure on logistics businesses and couriers to complete fast and cost-effective deliveries.

What next?

Despite the challenges that faced online retailers in 2023, most businesses are looking forward to a busy and optimistic year in 2024. A good packaging strategy in the New Year will help you to reduce your number of breakages and returns, and increase customer satisfaction, helping you control your overheads and maximise your profitability as you plan for growth. To find out more about our luxury bespoke packaging services, please contact Kudos Giftwrap today by clicking here.