From The Co-Founders


Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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Online Merchants Get Comeuppance

👀 New Respect for Brick-n-Mortar Retailers

Retail IS detail. And some of those pesky details are increasingly cropping up to torment online sellers. 

For example, there's the matter of managing returns. As Chris Jarvis wrote in DMM/*:

  • "We return roughly 30% of all online purchases compared to only 10% from brick-and-mortar."
  • "In 2021 retail returns jumped to an average of 16.6% versus 10.6% a year ago."
  • "Research suggests that a single online return can cost two-thirds the original price to handle when we include labor, transportation, and warehousing costs." 

Meanwhile, the pure-play online retailers are confronting the ever-demanding customer expectations. 

  • 84% of customer expect online retailers to offer a no-cost return option
  • 80% say they will stop buying from an online merchant after a single bad returns experience. 

Is it any wonder that Amazon partnered with Kohls to accept Amazon returns? As Jarvis points out, "Returns start inside the local community – you need to be everywhere your customers live."  Surely other online merchants will be jumping onto that lifeboat.

Meanwhile, online merchants are beset by other challenges. And once again, they discover newfound respect for physical retail, and actual customer interaction. (How do those guys make it look so easy, they wonder. 🤔)
"The rising costs of doing business online is making physical retail more appealing for e-commerce brands," noted The Wall Street Journal** in "Why Bricks Might Save Clicks."  

  • Online shopping has declined from its pandemic highs, and foot traffic at indoor malls keeps growing.
  • In March, mall foot traffic was up 16.6% from a year earlier.

All of which prompted plans from online furniture seller Wayfair to open three brick-n-mortar stores this year; the stores will be "valuable avenues for discovery, visualization and marketing,they explained to their investors. 

What's really driving this move to physical retail to attract new customers? Because online advertising costs have increased dramatically.

  • For example, the customer acquisition costs for e-commerce merchant Chewy have ballooned from $148/customer in 2019 to $424 in 2021, with expectations of $505/net new customer this year. 
  • In contrast, Petco, which generates most of its revenue in stores, spent roughly $170 of advertising per net new customer in 2019, but just $64 in 2020, and then $60 in 2021.

In a sense, online selling just may have seen its best days. It will always be part of retailing, but it will no longer be the tail wagging the dog. A comeuppance is happening. 

Combating the Returns Crisis – Charting a Path Forward. Chris Jarvis,, February 16, 2022.

** How Bricks Might Save Clicks. Jinjoo Lee, The Wall Street Journal, April 22, 2022. 

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