Consumers are embracing online shopping, which requires fashion retailers to invest heavily in developing ecommerce – but an increasing number are questioning the return on that investment.
Over the past few months, we have carried out a series of in-depth interviews with fashion retailers and brands – on and off the record – about the expense of operating online.
We have learned that many multichannel retailers, and even some of the nimbler pureplays, are struggling to make ecommerce profitable as a result of the growing cost of marketing, delivery and returns.
On Monday, we exclusively reported that Asos has asked its suppliers for a 3% discount on all stock received from 1 September onwards. It said this was to support its “future growth” and that of its suppliers, but simultaneously highlighted recent “transformational investments” it has made, including in customer acquisition and retention, new warehouses, and a move to become more sustainable.
We believe this to be the first time Asos has asked for a blanket discount, and it follows a difficult few months for the etailer as it has struggled to get its product mix right and issued a profit warning. It also underscores the challenges of making online work, even for those unfettered by onerous store leases.
Yet retailers should not be put off trading online. This is a long game: anaylst Retail Economics predicts that in the next 10 years online sales will grow to 53% of total retail sales, up from 19.2% in 2019. This will make ecommerce more profitable, as the economies of scale increase. Retailers must stay ahead of the curve when it comes to digital innovation in order to capitalise on this growth.
This is particularly important as bricks-and-mortar retail evolves.
When I joined Drapers in May 2014, the high street was a very different place. Over the past five years, several well-known chains have shrunk their store portfolios or disappeared altogether. As we report, a string of recent company voluntary arrangements have forced the industry to a new tipping point when it comes to high rents.
It is a fascinating time to become editor of Drapers. Our role is to help you navigate through the uncertainty, and maximise the profitability of all sales channels – and it is a role I take very seriously. If you ever have feedback on how we’re doing, please email me at email@example.com