The Ecommerce Boom and Challenges with Returns
Package Returns Surged by 70% Last Year
Returns have always caused challenges for retailers. With ecommerce booming, stores have new return-related problems to solve. In 2020 the number of ecommerce packages returned climbed by 70% compared to 2019 levels.
Analysts expect that some of the online shopping habits formed during the pandemic will be here to stay. In fact, a recent survey showed that 42% of consumers say they will shop online even more than they do now once the pandemic subsides. Because of these trends, ecommerce companies large and small are working on permanent solutions to the challenges they have faced with returns.
Trends Driving Customer Behavior
About 30% of all online purchases are returned, which is roughly three times the return rate for items purchased in brick-and-mortar stores. Ecommerce purchases are returned more for a variety of reasons.
Sometimes items ordered online do not fit properly, or do not meet customer expectations for other reasons. Also, online shoppers often order multiple sizes or colors of items so they can see them physically with the intent to return what they do not want. It also tends to be easier for customers to simply put an item back in the mail than it is to go to a physical store and wait at the return counter.
Though online returns offer convenience for shoppers, they are a significant weight on retailers’ balance sheets because of shipping and processing costs. On average, every $1 million reduction in returns adds $500,000 to a retailer’s profits.
Many large retailers like Amazon (AMZN) and Walmart (WMT) have employed the strategy of just telling customers to keep unwanted items. Meanwhile, Ulta Beauty (ULTA) offers virtual makeup try-ons. The feature was rolled out in 2016, but its popularity surged during the pandemic. Similarly, Levi Strauss & Co (LEVI) built an online tool which allows shoppers to see how jeans and other items look from various angles on different body types.
Outside analytics companies are also helping retailers with their return strategies. For example, Newline is a software company which has developed what is called a KeepScore. This number measures how likely a customer is to return products. For customers who are habitual returners, companies might choose not to offer them special discounted prices on certain products. Companies across industries will be working in the coming months to create positive return experiences for customers while not letting these return procedures drain their balance sheets.
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EU May Require Big Tech to Pay for New Content
The European Parliament Discusses Options
Lawmakers in the EU are considering ways to require tech companies like Google (GOOGL) and Facebook (FB) to pay news outlets for their content. Australia has led the way in pushing for this type of legislation, and now Europe may follow suit.
Members of the European Parliament are currently putting together two important digital regulations for the bloc. One is called the Digital Services Act (DSA) and another is called the Digital Markets Act (DMA). Either of these bills could be amended to include some of the reforms Australia is working to pass or, separate legislation could be drafted later. EU parliament members are currently in discussions about the best way forward.
Following Australia’s Lead
If the proposed actions become law, they could cause strain for social media platforms and search engines, as well as tensions between these companies and the EU government. In Australia, Google has threatened to pull its services from the country if it is forced to pay for news. Facebook has said that it will block Australian users from sharing news if proposed laws in the country come to fruition.
Last week, Australian Prime Minister Scott Morrison and Google CEO Sundar Pichai had what Morrison described as a “constructive meeting,” signaling that the tech giant and the Australian government may be headed toward some form of an agreement. Details about a potential deal have not yet been released.
The EU made sweeping changes to its copyright laws in 2019. These laws made it so platforms are required to compensate media outlets for snippets of their content under certain circumstances. Google has promised to spend $1 billion on news licensing over the next three years and has reached agreements with news publishers in France.
But many EU lawmakers feel this is not enough and more changes could be coming. Investors in the tech industry and the media landscape will be eager to see how negotiations progress.
Airlines and Fast Food Restaurants Lean on Loyalty Programs
Recovering from the Pandemic and Attracting Younger Consumers
Businesses across a variety of sectors are seeing loyalty programs as a way to shore up their balance sheets during a time of economic uncertainty. They are also using loyalty programs to appeal to millennial and Gen Z customers.
Airlines are leaning in to this trend for several reasons. They expect that younger travelers will be more likely to fly in the upcoming months as the pandemic continues. These customers will also be important in the years after the pandemic as airlines work to recover.
Even before COVID-19 hit, millennials made up the largest percentage of air travelers by generation. In 2018 25% of the 4.3 billion passengers who flew were millennials. Gen Z is beginning to reach an age where they will be spending money on travel, and airlines are eager to gain their loyalty early.
Spirit and American Airlines Offer Unique Perks
Airlines are noticing that millennials and Gen Z’ers tend to want easy, flexible ways to use air miles. Spirit Airlines (SAVE) recently revamped its loyalty program to add features like “points pooling,” a way for customers to share points with up to eight friends or family members.
American Airlines (AAL), which reported a record $8.9 billion in losses in 2020, has also been using creative ways to attract new customers to its loyalty program. Though some of these perks, like ebook services, are not directly related to travel. The air carrier’s leadership hopes these unique perks will draw in younger customers and help it recover from a year of hardships.
Burger King Begins Testing Loyalty Program
The airline industry is not alone in its quest for loyal customers. Yesterday Burger King (QSR) began testing its “Royal Perks” program in select American cities. The initiative allows customers to earn “crowns” when they spend money at Burger King and then redeem those crowns for free menu items.
Other big names in the fast food industry like McDonald’s (MCD) and Starbucks (SBUX) have built up app-based loyalty programs in recent years. As consumer habits have been altered dramatically this year and will likely continue to be volatile, brands see loyalty programs as a way to hold on to customers in an ever-changing market.