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Retail Reflections: Winners and losers; costly returns; too much charity?

Alan Monahan writes: Okay, although some of the big beasts have yet to declare their figures, that’s Christmas done and dusted for most of you. I just hope that your festive sales were healthier than many of those that have been reported.

But although there was little to cheer, retailers with something different to offer did well – not just the Selfridges chain, whose in-store rock ‘n’ roll theme boosted footfall, but also the more modest arts and craft business Hobbycraft. It saw like-for-like sales growth of 9.5% in the six weeks leading up to Christmas, helped by in-store workshops and demonstrations in its 94 outlets. Adding the personal touch certainly did the trick for them!

And the creativity and entrepreneurship of booksellers in the face of the challenging retail landscape paid dividends too: a survey revealed that 73% of those polled saw their festive sales up on last year, with 63.5% reporting a higher number of shop visits.

Slashing prices was the route taken by many retailers. But it wasn’t enough to lure shoppers, and sales growth stalled for the first time in 28 months, according to the British Retail Consortium, which reported the worst December sales performance in 10 years and pointed to a challenging start to 2019 for retailers, with business rates set to rise once again and the threat of a no-deal Brexit.

Diane Wehrle, of retail intelligence firm Springboard, says that if nothing else is learnt from last month, it is that discounting does not stimulate customer activity and is severely eroding the strength of Christmas as a major trading period.

It was the big stores, of course, that started the trend of bringing sales forward and Wehrle warns that continuing to do this will undermine profitability and ultimately longer-term innovation in retailing. But even though there is strong evidence that ‘retailers can no longer rely on Christmas trading to redeem revenue lost earlier in the year’, will they stop doing it? I don’t think so. The knock-on effect of this phenomenon – and that ghastly import from the US, Black Friday – is that Christmas is no longer special.

According to the Office for National Statistics, online spending exceeded 20% as a share of all retail sales last November as footfall declined. But it is not without its problems.

As the rise of online retail has accelerated, it has brought with it another shift – more frequent returns. Data from Barclaycard shows that 37% of retailers have seen a rise in refunds since 2016. And although the Centre for Economics and Business Research (Cebr) states there are no solid figures for the total extent of returns in the UK, the conventional industry estimate for the US is that 30% of products ordered online are returned, compared to just 8.9% in bricks-and-mortar stores. The UK figure is likely to be similar.

A calculation by the firm Clear Returns, quoted in the Financial Times, suggested that online returns cost £20 billion a year in the UK in 2016, and the Cebr would expect the figure now to be much higher.

When an item is sent back it will not immediately be put up for resale. Instead, it could pass through up to seven pairs of hands for assessment. By this point, the item may have been discontinued, or had its original price slashed. Selecting and delivering a product cost retailers between £3 and £10 three years ago; dealing with its return could cost anywhere between £20 and £30. Again, according to Barclaycard, a third of retailers in the UK have increased their prices to cover the cost of such returns.

The Cebr says that consumer surveys suggest that it might be difficult for retailers to avoid returns: one found that for 57% of UK customers, free delivery and returns is the most important aspect when shopping online. Another poll revealed that 37% of retailers discovered that free returns has led to increased customer satisfaction, while 44% think they must offer the service to keep up with the competition.

So, although the Cebr estimate that £19 billion would have been sold online during the Christmas period in 2018, at a return rate of 25% (allowing for the probability that Christmas presents are less likely to be sent back), £4.8 billion of this may be returned!

Did you know that a new Data Protection Act now applies to purchases made online? This has led internet retailer Boden to advise people who wish to return unwanted gifts to tell the original buyer in advance to avoid giving them a nasty surprise!

Until I read the Mail on Sunday I wasn’t aware that this Act was passed last year in response to the EU-wide General Data Protection Regulation which demanded tougher rules among member nations to protect personal data.

When the newspaper asked 30 retailers about the return of unwanted gifts bought over the internet, 11 said they would have to inform the original purchaser.

However, consumer expert Martin Lewis offers a suggestion that would avoid causing embarrassment: ‘The solution should be to allow people to tick a box on the website, saying something is a gift. Then the person who it was for would get a gift receipt, and it would be easier to exchange something.’

My wife and I support our local hospice charity shop – giving furniture and various bits and pieces – and will continue to do so. But I was shocked to see figures from the Ministry of Housing, Communities and Local Government which show that the cost of offering charities an 80% discount on business rates increased to almost £1.9 billion in 2017-18 from £850 million in 2008.

Residents and retailers in some parts of the UK already complain that there are too many charity shops and that their proliferation is squeezing out independent shops and cafés, although there is no evidence of a shortage of the latter where I live.

But it does seem unfair that at a time when gift and greeting card retailers and the like are struggling and facing another business rates rise, most of the big charity shops – according to a survey in The Times – saw their sales rise last year. There’s something wrong here.