It’s now more important than ever that consumers sit at the heart of supply chain strategies, because of the increasing influence of social media, according to Ben Balfour, Commercial Director at international logistics company Advanced Supply Chain Group.
The recent Black Friday and Cyber Monday sales peak epitomise the growing popularity of online shopping. Early reports suggest that in the US, the home of these shopping phenomenons, online sales for the combined retail calendar days will hit record highs of almost US$17billion. They are far out-stripping in-store sales.
If we look closer to home in the UK and beyond just a weekend of frantic clicking and cyber shopping, the most recent Government figures show ecommerce sales are worth more than £568billion each year. Online shopping now accounts for around a fifth of total retail sales in the UK and it doesn’t take a genius to predict this share of sales will only get larger. It’s difficult to see the popularity of internet shopping waning.
However, when thinking about the growth in ecommerce and how this affects supply chains, one of the most interesting trends to really take note of is shoppable social media. Platforms like Facebook and Instagram are moving way beyond the premise of simply advertising products and are becoming sales channels in their own rights.
Shoppable social media
Social media is developing to make it easier for consumers to buy directly in-platform. This, according to our research of 2,000 online shoppers, will lead to 34% of consumers making more impulse purchases.
The real-time nature and immediacy of social media will see consumers buying products with less consideration. They’ll act on a whim but will do so safe in the knowledge they can still ‘try before they buy’. If they receive their item and then, after a period of cooling-off, decide it’s not right for them, they know they can send it back.
This buying habit is reflected in our research, which shows 63% of these impulse shoppers on social media will end-up returning more items. Putting this into context, social media shopping will cause a fifth of all online shoppers to send more of their purchases back.
It’s because of these changing buying habits that supply chain strategies need to be developed with a consumer-first and cost-second approach.
Putting consumers first
Many retailers are, rightly, concerned by margin dilution, with the biggest cause of this being returned items. Goods which are sent back don’t directly generate any revenue for retailers, but still appear as a cost on the balance sheet.
Therefore, the prospect of social media shopping leading to a higher volume of returns can set alarm bells ringing, with retailers being concerned by rising direct costs driving down profitability. With this in mind, many strategic conversations about returns and reverse logistics will prioritise ‘cost’. While this appears to be a logical approach, it tends to prove a false economy.
Cost-first decisions won’t often account for what consumers want. Our research, for example, shows that paying for returns proves to be the biggest frustration for 22% of consumers. If retailers opt for policies where they charge for returns, it’s more likely to deter purchasing in the first place, compromising sales of those items consumers pay for and keep.
Beyond charging for returns, there’s a tendency to make returns as low-cost an operation as possible. Investment in reverse logistics will be minimised, meaning the service provision to consumers is, at best, basic. This can frustrate consumers and jeopardises satisfaction, word of mouth, loyalty and repeat purchasing.
Our research of 2,000 consumers shows that waiting for a returns refund is the second biggest frustration for 20% of online shoppers – it’s just behind paying for returns. Other frustrations include repackaging the return (17%), taking the return to a post office or collection point (17%), completing returns paperwork (9%) and knowing the status of the return (7%).
Basic reverse logistics puts the ownness on the consumer to return their item, exposing them to all of these frustrations. This is a missed opportunity for retailers to boost brand reputation and enhance the consumer’s sales experience.
Technology can effectively track a return through the supply chain, meaning retailers can keep consumers updated about the status of the return and refund them more quickly. Digitising the returns process can also minimise paperwork, improving overall stock inventory management for the retailer and also appeasing consumers.
Enhanced supply chain visibility also means retailers can more effectively and efficiently process returned items. This enables prime stock condition and sales availability to be maximised.
‘Returns’ on investment
Approaching returns with a consumer-first view and accepting that, for online shoppers, returning items is an increasing part of their shopping experience, can yield a significant competitive advantage. Data rich systems offer retailers the opportunity to mine highly valuable business intelligence and data analysis to make informed – and ultimately more effective – commercial decisions to maximise residual value from their returns. For example, analysing the flow of goods in and out of the business will identify the buying habits of consumers, equipping retailers with information to allow them to better plan for future seasons and trends such as Black Friday and Cyber Monday.
Social media shopping is evolving because it is what consumers want. It meets their demands for speed, convenience and relevance. Supply chain strategies need to adapt to this and ensure they’re evolving to satisfy the requirements of the consumers shopping online. Strategies must be consumer-centric to drive sales and repeat purchasing.
