James Hankins and JP Castlin wrote an article for MarketingWeek (10 Aug 2021) titled The changing world of ecommerce: Why winning the final mile is crucial.
« By and large, moving retail sales from a physical store to a digital outlet is equivalent to taking purchases from where they are most profitable to where margins are lowest, yet few supposed experts appeared to take note. »
« it appears unlikely that ecommerce take-up will revert back to pre-Covid levels. That is not to say take-up will remain where it is currently are, but what we saw was, as alluded to earlier, not a new trend as much as an acceleration of existing ones. »
« Although Covid drove customers online and revenues followed, the pattern was obvious: profits were scarcely seen as organisations grappled with improving their fulfilment operations under the significant stress of rapid channel penetration growth. »
« Recent research by Alvarez & Marsal echoes our finding of an inverse relationship between share of sales online and margin; as ecommerce penetration rises, margins fall. »
« Made.com recently hit a £1bn cumulative revenue over a 10-year period. However, during its biggest year in terms of revenue (2019), it also posted its largest loss. Its consistent failure to produce profit led to a recent IPO flop. »
« Nike, featured heavily in industry press of late, has been boasting about its rapid growth in Nike Direct while reducing exposure to third-party resellers. Yet despite a direct sale contributing 66% more to revenue than a comparative wholesale sale, the overall impact on gross margins has been negative. Of course, many things can affect margins at a global level, but it is nonetheless telling that Nike Direct struggles to provide a positive contribution. »
« Deliveroo’s recent IPO was publicly deemed the worst in London’s history. This was perhaps somewhat unsurprising; the business had seen nine figure losses in each of the past three years despite an overall revenue growth of more than 100%. »
« UberEats follows a similar pattern. Obfuscation with published accounts aside, the business tripled its gross bookings during the pandemic, leading to a reported 179% year of year growth in revenue (to $3.9bn). And yet, at 20-30% cut of orders, the company has never posted a profit. Its most recently reported $873m adjusted EBITDA loss is also likely higher – we discovered that the figures hid some $3.3bn of cost. Contrary to popular belief, the company appears lightyears from making money. »
« Just Eat Takeaway was initially just a marketplace matching users with restaurants that provided their own delivery and, by historic accounts, profitable. In 2019, Takeaway.com purchased the company and shifted it to a delivery marketplace. At 60 million active users, 588 million orders and a claimed gross merchandise value of €12.9bn, the company saw a loss of €185m. The list, as they say, goes on. »
« Given half of all online purchases are click-and-collect from the store, and 70% of returns are too, reducing and incorporating the cost of fulfilment within existing cost structures allows the company to drive efficiency. When customers are in-store, they are also more likely to browse the assortment, leading to further incremental sales. »
« The worrisome consequences… Firstly, there is the push for a zero hours culture, commonly labelled the ‘Uberification’ of jobs… companies can shift employment risk to the individual. While this route appears to be (finally) closing through legal means, Amazon’s treatment of its workers remains notorious, as are its attempts at fighting unionisation.»
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