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Sale or Return August 10, 2015

Posted by Audit Monkey in The State of the British Nation.
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As some will note I haven’t commented on the Tom Hayes trial, corruption at FIFA and continuing fuss at the Kids Company. I’m sure I will get around to this shortly. However, one item which caught my eye was an article in the Sunday Telegraph (8th August 2015) concerning online shopping.

I’m not going to comment on the benefits of online shopping but I should explain. I’ve always been slightly sceptical regarding the business benefits of online retailing or trading. The actual saving (profit) is the gain in efficiencies that online trading bring, e.g. airline tickets are sold via an online portal rather than a Travel Agent or Airline Call Centre. Thus the need for an army of clerks keying passenger data into a database is eliminated. No clerks, no wage bill. However the wage bill is increased due to the need to keep an army of IT technicians to maintain the integrity of the website. So I wasn’t surprised by the decision of the John Lewis Partnership and Waitrose (upmarket supermarket) to charge for deliveries over a certain value in order to recoup costs.

However, it seems they aren’t the only retailer to be encountering problems. According to the Telegraph article, shoppers are ordering multiple items and returning the items they don’t wish to keep. (I will confess I’ve done this; I thought a suit jacket I had purchased instore was too big and ordered a smaller size online to compare.) One would think that this may amount to 5% of all items despatched but in fact is between 25% to 40% as shoppers take advantage of free returns policies. In turn there is a processing cost for the retailers concerned! Sadly some end customers are being unscrupulous such as returning worn shoes with scuff marks, suits with wedding invitations in!

And there’s the rub. If I were the retailer, I would only accept the return of goods if they were in pristine condition. May they do but the article suggests the majority of retailers don’t. In hindsight I imagine retailers anticipate an amount of shrinkage and factor this into their prices for the assortment of their goods. Even so, the high percentage of returns does continue to make me question the profitability of online retailing.

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Comments»

1. ITauditSecurity - August 15, 2015

AM,
Can’t say I ever thought of ordering two sizes of something. Good idea!

I have ordered 2 pairs of shoes when I only wanted one, but that’s only because it was 2 different manufacturers and my foot is hard to fit. I returned both pairs as both pinched.

I would think that the extra revenue coming in more than compensates for returns. If not, the business is self-corrected. 🙂

Audit Monkey - August 16, 2015

That’s the problem. By ordering multiple items customers are placing strain on the returns systems of the internet retailers. It isn’t just the only the physical returns that are the problem, it’s all the accounting adjustments in the books for the refunds! So while July may have been a great month for revenue, a glut of returns in August will impact the bottomline and make a mockery of the financials for the previous month.


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