Three reasons why retailers need to redesign their post-pandemic channel strategy

TL;DR: The three reasons why retailers need to redesign their post-pandemic channel strategies are: 1) Low profitability for online distribution channels 2) High product returns 3) Unclear buying journeys

1) Profitability for online distribution channels

The world has found a new favorite distribution channel next to home delivery, which is Click and Collect ((BOPIS). But turns out that Click and Collect is not a highly scalable and profitable distribution channel for the retailers, although the last mile is being shifted to the customer. The reason is that it does involve a fair amount of additional human labor at the store to conduct the picking. One study from AlixPartners found out that the profit margin on a $100 sweater drops from $36 to $23 for Click and Collect vs. the classic distribution - shipped from the distribution center.

2) Product returns

Product returns are an old problem with a lasting impact on profit margins in ecommerce. Since the vast majority of retailers has turned to e-commerce after the outbreak of the pandemic, the problem with product returns became more prevalent for many. About one third of clothing ordered online is returned versus 8% bought in-store, according to research from HBR.

3) Unclear customer buying journeys

Research from HBR showed that customers who try clothing on in an in-store fitting room are almost 7x more likely to buy than those who search on the web. Nearly 25% of U.S. apparel shoppers visit Amazon early in their buying journeys, but most bought elsewhere. Are therefore online channels more important for product discovery in those categories, but less so for the purchase itself?

Conclusion

So what to do about it? How can retailers secure higher margins in the future? They need to reinvent their channel strategies. The key to design better post-pandemic channels lies in understanding your customers better than your competitor. With that knowledge, you can design more attractive and profitable customer journeys.