With a two-day strike scheduled for Thursday and Friday this week, and the possibility of further industrial action in the run up to Christmas, online retailers are justifiably concerned about the possible effects on their business.
I’ve outlined a few of the potential problems for online retailers below…
Online retailers will have to find alternative solutions
The planned strike has been labelled ‘suicidal’, and its not hard to see why, with the potential for lost business from retailers who can’t afford to rely on Royal Mail.
With mail volumes decreasing over time, the growth of online retail offers the Royal Mail an alternative revenue stream, but this will be undermined if retailers cannot rely on the company.
This is the second time in the last three years that potential strikes have threatened Christmas online retail sales, and it’s likely that the Royal Mail will lose some of this business for good, as online retail depends on reliable delivery.
Amazon, Royal Mail’s second largest customer, has already cancelled its £25m contract in favour of a rival service, while John Lewis has followed suit.
Delivery costs will rise for etailers
Many retailers use Royal Mail because it is the cheapest solution for deliveries, so being forced to switch to other carriers means that extra costs will be incurred. For example, a package that costs £1,90 through Royal Mail can be as much as £4.80 though rival carriers.
Retailers reluctant to deter customers with by raising delivery costs will be forced to swallow the extra costs themselves. According to a recent IMRG poll, 79% of retailers offering alternative delivery arrangements would
be absorbing additional costs in an effort to minimise the impact
on their customers.
There are no real alternatives for items under 2kg, so some retailers of goods such as DVDs and games will have a real problem.
The strike may discourage customers from shopping online
Delivery is absolutely key for online retailers, and customers need to be confident that their orders will arrive in time for Christmas.
If there is any doubt that the presents they are thinking about ordering for their children will not arrive in time for Christmas day, many will simply not risk it and will spend their money offline instead.
Also, while some online retailers were offering Christmas delivery right up to 23rd December last year, if strikes cause a backlog, then the cut-off date will be much earlier this year.
For some of the reasons mentioned above, its likely that the strike will cost the UK online retail industry a significant amount in terms of lost business, at a time when the country is just coming out of recession.
A recent release from Kelkoo estimates that postal disruption could cost the industry £220m in lost online sales and increased delivery costs.The majority (77%) of retailers polled by IMRG also believed that the strike will deter consumers from shopping online.
What is harder to quantify is the cost of lost repeat business as a result of late or failed deliveries. 94%
of shoppers said they would be unlikely to place further orders with a retailer that failed to deliver.
More customers will use reserve and collect services
Mutichannel retailers, such as Argos and Comet, that offer reserve online and collect offline services may be well placed to deal with customer concerns about delivery by providing the option of collecting items from a local store.
If you are an online retailer, what steps you are taking to deal with the Royal Mail strike? Have you made alternative arrangements yet? Will you go back to Royal Mail afterwards? Let us know below…
[Image by Adrian Short via Flickr, various rights reserved]