Retailers in the UK respond slowly to online 'flex shoppers'

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New research from UPS has highlighted the challenges faced by UK and European retailers in adapting their operations to digital consumers. The UPS Pulse of the Omni-channel Retailer survey highlights how innovation is needed to keep a stable or growing market share in a retail market that is increasingly global and dominated by players conducting cross-border sales.

"Consumers are exploring multiple online and traditional sales channels and will use whichever best meet their needs," said Carrie Royle, retail marketing manager, UPS Europe. They also use social networks to compare and judge retail offers."

Earlier this year, logistics experts at more than 700 retail companies in Europe, including 100 retailers in the UK, shared their experiences for the survey. Retailers in Europe have specific investment and restructuring plans to keep up with leading retail competitors. Over 30% of business executives said they face big challenges in investing enough in IT, organising logistics, understanding consumer behaviour and making management responsive to omni-channel operations.

As retailers adjust their supply chains to consumers who frequently shop online, also known as "flex shoppers," they should focus on three key areas: physical stores, out-of-stock situations and cross-border returns.

1. Making Better Use of Brick-and-Mortar Stores

If UK-based retailers want to stay competitive, they should consider store footfalls are shrinking as online is growing, which means they have to go beyond the traditional purpose of a retail store, and use it as part of the inventory and distribution network. The UK leads on using stores for value added services (65% of retailers use their store network to provide high value added services such as click & collect), but when it comes to using the store network to turn in-store out-of-stock situations into sales, they are somewhat behind their European counterparts. Only 19% of UK retailers enable consumers to reserve the product either online or in the physical store in case of out-of-stock situations. UK retailers are leading the way for non-working day deliveries.

Almost one-third (27%) of European retail companies already use stores as fulfilment centres for online orders, but as the chart highlights, large variances exist among the countries surveyed.

The UPS data also shows 31% of retailers in Europe are planning to use the store network or alternative pick-up locations in the next 12-24 months to offer more collection convenience to customers who order online. "The retail research confirms our experiences with flex shoppers. Busy customers pick up their packages at their convenience at one of our 24,000 UPS Access Point locations across Europe and North America," Royle added. "Nearly 27 million consumers around the world have signed up for UPS My Choice, an online service and mobile app that allows you to reschedule and reroute deliveries at your convenience."

2. Turn Out-of-Stock Into Sales

According to previous UPS consumer research, when faced with an out-of-stock item, 41% of European consumers said they will go to a competitor's website or app and 20% said they will go to a competitor's store. Only 17% said they are willing to buy and wait. The omni-channel survey research shows online businesses are quite responsive to out-of-stock challenges; 68% of e-tailers offer tracking and delivery to a preferred address when the product becomes available and 59% track orders and proactively notify the consumer on availability, while the physical stores lag behind. Almost half of brick and mortar retail stores (45%) simply suggest customers wait, without providing an alternative.

3. Managing cross-border returns

It is widely recognized that managing returns is a key retail success factor for all retail businesses including e-tailers. Customer confidence and brand integrity depend on efficient returns. 61% of UK retailers are charging for the return process if the items are not damaged or defective, well above the European average of 43%. Retailers said their key challenges in this area are managing defective goods (65%) and performing quality checks (61%). The survey also suggests retailers need assistance from third-party logistics partners. Over 60% of logistics leaders said they needed multiple third party logistics partners to manage returns, and over 70% said they contribute to cost-effectiveness. "Managing customer orders and returns across borders can be challenging", Royle said. "UPS offers a wide variety of returns options for retailers. Consumers can drop off their pre-paid and pre-labeled return packages at any of the 15,000 UPS Access Point locations across Europe."

About the UPS Pulse of the Omni-channel Retailer Survey

In the search for a better understanding of the transition toward an omni-channel approach to retail sales execution and fulfillment, UPS commissioned the 2016 Pulse of the Omni-channel Retailer survey. It covers the UK, Belgium, France, Germany, Italy, the Netherlands, and Spain.

IDC Retail Insights conducted telephone interviews in the native language of each country between January - March 2016. There was a sample target of 100 respondents per country (total = 707);

The interviewees were senior business and operations executives, including those responsible for supply chains, logistics and e-commerce. The survey covered both direct retailers and upstream retail manufacturers in apparel, consumer goods and high-tech industries.