Soaring Delivery Fees and High Street Resurgence Fuel Online Shopping Abandonment

Soaring Delivery Fees and High Street Resurgence Fuel Online Shopping Abandonment

28 May    Finance News, In Business

According to figures from Retail Economics and GFS, last year saw a 9% increase in “basket abandonment,” amounting to approximately £3 billion in lost sales.

Online retailers missed out on £34.4 billion in 2023, with shoppers citing high delivery costs, limited shipping options, and new returns fees as key reasons for scrapping their orders.

This is only the second year Retail Economics and GFS have compiled such data, but previous studies indicate a sharp rise in this trend. A 2018 report from Barclaycard found that online stores lost £18 billion due to basket abandonment. While overall online spending and inflation contribute to this increase, the abandonment rate’s growth outpaces that of online sales, which have risen by around 79% since 2018. Conversely, basket abandonment rates have surged by 92%.

Richard Lim, Chief Executive at Retail Economics, attributes this trend partly to the current economic climate, noting a significant rise in basket abandonment among middle and high-income millennials. Despite being digitally savvy, millennials (aged 25-34) are now over three times more likely to abandon baskets of clothes and shoes than those over 65 and twice as likely to abandon furniture purchases compared to those aged 55-64.

“This is partly due to the second wave of the cost-of-living crisis,” Lim explains. “These aspirational millennials, who likely bought their first homes in the past decade and are accustomed to low-interest rates, are now facing increased borrowing costs.” As a result, they are more cautious about spending and increasingly sensitive to higher checkout costs.

Delivery and administrative fees have steadily risen. As inflationary pressures and shipping disruptions escalated in 2021, retailers began quietly increasing checkout costs. Many have introduced higher minimum spend requirements for free delivery, while others have outright increased costs. For example, Next’s home delivery fee rose from £3.99 in May 2020 to £4.95 today. Similarly, Argos’ fast-track same-day delivery for small items now costs £5.95, up from £3.95 in 2021.

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Additionally, the cost of returning items has increased. Many fashion retailers have introduced new return fees to curb over-ordering and returns. Oh Polly recently announced a return fee of up to £8.99, joining H&M and Zara in implementing similar charges. While these measures reduce serial returners, they also deter a broader range of customers.

Active customer numbers for online fast fashion retailers like Asos and Boohoo have declined over the past year. Although these retailers claim they are losing customers who frequently return items, data suggests that higher costs are driving general customers to abandon orders more frequently. According to Retail Economics and GFS, 55% of people who abandoned baskets did so due to return fees, up from 49% last year, while 80% cited expensive delivery charges.

Gillian Ridley Whittle, former fashion director at Topshop and now head of sustainable underwear brand Peachaus, notes that some shoppers habitually fill baskets without intending to buy. However, she understands why more people are now scrapping entire orders due to unexpected costs at checkout.

Customers are accustomed to a seamless shopping experience, and any disruptions, such as hidden costs, can prompt them to abandon their purchases. As retailers grapple with rising costs and strive for more profitable orders, the challenge of balancing customer satisfaction and profitability intensifies.

For online retailers, the stakes are high as more shoppers return to high street stores. “In the current consumer environment with increasing competition, retailers cannot afford to let potential sales slip away,” Lim warns.

Persistent follow-up emails can also backfire, as customer John Burkitt illustrates. “A reminder and a working voucher code might have persuaded me,” Burkitt says, “but five emails a day are simply too much.”

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Retailers must tread carefully, balancing engagement without overwhelming their customers, to navigate the complex landscape of online shopping abandonment.

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