Thursday, May 5, 2016

E-commerce having negative impact on retailers’ operating earnings

Online sales and returns are taking toll on retailers’ bottom lines.

Operating earnings as a percent of sales has declined by up to 25% due to a shift from in-store to online sales, combined with e-commerce and omnichannel investments and the high cost of fulfilling e-commerce transactions, according to a study by strategic retail advisory firm HRC Advisory.

The study found that investments in supply chain upgrades, digital marketing and IT, variable logistics costs and managing a high level of online returns are generating incremental SG&A costs of 2 to 3 percentage points of sales. The combination of this together with real estate, wage inflation and the declining in-store sales is resulting in a 1-2 percentage point reduction in physical store profit contribution.   . . . more

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