If the lockdowns of the past year introduced millions of people to the ease of online shopping, they also underlined some e-commerce pain points: clothes that don’t fit, returns that take ages to process, groceries that arrive nearly expired and tiresome customer service. If online retailers want to retain customers when physical stores reopen, these are problems they’ll need to solve.
In the US alone, consumers spent $192 billion more online in 2020 than they did a year earlier. E-comm stocks have benefited accordingly: In the US, furniture seller Wayfair Inc.’s shares jumped almost 10-fold over the past 12 months, online stylist Stitch Fix Inc. is up 250% and Farfetch Ltd has gained almost 700%. Amazon.com Inc. surged 62%. In the UK, Asos Plc. went up 340%.
These valuations will be hard to justify if there’s a big swing back to brick-and-mortar stores. Digital winners should be thinking about ways to improve their customers’ experiences, from using data to help people choose the right items to streamlining the process of returning and exchanging.
Clothing is perhaps the trickiest sector. A lot of clothes shopping had already migrated online before the pandemic. In the UK, for example, 18% of textile, clothing and footwear sales were made online in January 2020, according to the country’s Office for National Statistics. Although this grew to 50% a year later, it doesn’t mean we’ll all continue clicking for clothes.
Online clothing sales last year rose far less than did food and beverages, consumer electronics, personal care and home furnishings, according to eMarketer. That’s partly because people were leaving the house less often, but it also has to do with longstanding challenges in matching people to the correct sizes. This was less of an issue during lockdown (sweatpants always fit), but it will resurface as a pain point once people start needing new clothes.
Imagine you want to buy new sneakers. You order a $100 pair from Nike Inc. but they’re too small, so you return them and order the next size up. That second pair, however, won’t be dispatched until the initial order arrives back at the warehouse. At this stage, it’s been a week since you first ordered the shoes, Nike now has $200 of your money and you still don’t have a pair that fits. For many people, this is far more cumbersome than heading to one’s local store, where you can try on three pairs in 10 minutes and head home with your new shoes.
Companies can learn from those that specialized in online selling before the pandemic. Take Stitch Fix. It sends an array of outfits to its customers based on their style preferences, and they only pay for what they decide to keep (so there’s no waiting around for refunds). The company takes scores of measurements of each item — for instance, it measures the size of men’s shirts in 15 different places — so they have an accurate sense of the fit. That lets them fine tune each article of clothing to the body measurements provided by customers. Returns then become primarily a question of taste rather than fit.
The surge in online shopping during the pandemic means that retailers now have a lot more data to tailor their offerings and respond to customer preferences, according to Oliver Wright, head of consultancy Accenture Inc.’s consumer goods practice. In luxury goods, for example, that means knowing exactly what VIP customers might like and messaging them when their favorite designer has a new collection in.
Once stores open, online companies will have to think harder too about recreating the in-person shopping experience.
In luxury, part of the joy of visiting boutiques is the attentive service you receive. At a Chanel or Louis Vuitton store, for example, a salesperson caters to your every need, finding exactly the right product for you, taking payment seamlessly and wrapping your item sumptuously. It’s not uncommon to be served champagne and other treats when splashing out on bling.
However, Bain & Co. estimates 30% of the personal luxury goods market will be online by 2025. How high-end groups are adapting may be instructive for other retailers.
Some are going all in to replicate store-based services online, with virtual styling sessions and presenting jewelry and watches on Zoom. Luxury online retailer Matchesfashion tries to provide a personal touch by including a note in every package from the person who packed the order. Others are embracing a hybrid model: Burberry Group Plc has a “social store” in Shenzhen, which has an exclusive section that shoppers can access only if they’ve engaged enough with the brand in store, online or through WeChat.
Companies can also find creative ways to use physical space. Boutiques could be used for super-speedy delivery to online VIP customers, for example. Matchesfashion already has a townhouse in the lush London neighborhood of Mayfair, which it uses for personal shopping sessions and special events.
Online shopping boomed in 2020 when people were forced to buy everything from home. To maintain momentum, retailers will need to smooth out a few wrinkles so that customers stick around when it becomes a choice.
Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries.