Markdowns, returns and out-of-stock merchandise make it difficult for North America retailers to lure new digital consumers.
This was according to “Retail Index: 2018 Analysis & Holiday Outlook,” a study from DynamicAction. The study, which tracked online purchases of general merchandise, home goods and apparel (excluding Amazon and grocery transactions), revealed that new customer orders are down 5% year-to-date compared to 2017. First- and second-time buyers are down 8% compared to 2017, and there has been no weekly increase year-over-year in new customer orders since April.
Retailers are relying on marketing in hopes of attracting new shoppers, but these costs are on the rise. There was an average 5% increase in marketing spend this year, investments that soared 60% just during the summer months (June-September). Similarly, orders that used a promotion are up 2% for 2018 so far, compared to 1% for all of 2017. However, margin impact due to promotions is also on the rise, up 3% year-to-date.
North American retailers have also held more inventory this year, with extra inventory increasing 21% between this year and 2017. A surplus of merchandise is also causing more markdowns. In fact, orders placed using a markdown are up 5% for 2018 compared to last year. The margin impact of these markdowns is up 27% year-to-date — and 18% in August alone.
Customers are eager to get their hands on this discounted merchandise, but they aren’t keeping everything they buy. Free shipping is up 13% year-over-year so far in 2018, but so are returns. In fact, the value of returns has jumped 36% so far this year.
In addition, there is a downward trend in the availability of products that customers are seeking online in North America. For example, there has already been a 3% drop in online product availability when a shopper was ready to make a purchase. Merchandise was out-of-stock 13% more frequently in the month of August, alone, according to the study.
“Pulling inventory levels into alignment ahead of the holidays will be paramount to driving profitability through the lens of ‘views availability,’ or ensuring specific products customers are seeking do not fall into fragmented or out-of-stock levels prior to the holiday season,” the study revealed.