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Small Business News: 29 September 2023
Anna Thompson
Anna Thompson
Discover content team
3 min read
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This week’s SBN round-up includes how consumers are adapting to uncertain economic times, and looks at the ways retailers are tapping into AI to deliver better customer experiences.

Economy causes cautious consumers to research more

A recent report by payment service provider Mollie1 has unveiled how shoppers are adapting to the tumultuous economy. In the survey of 5,000 consumers in the UK, France, Germany, Belgium and the Netherlands, just over half (51%) said they feel negative about their country’s current economic situation, whilst 17% feel “very negative.”

Unsurprisingly, more than half (54%) said they now always buy something for the lowest price possible, whilst almost 47% said being offered a discount by a retailer whilst browsing their website is the biggest motivator to stop scrolling and purchase a product.

Meanwhile, in the search for a deal, just under half (47%) said they now do more research before buying a product. A whopping 98% of respondents use social media to look for products, with YouTube the most favored platform (47% of respondents).

US consumers to change shopping behavior this holiday

Online review platform Trust Pilot has released its annual holiday survey of 2,000 US adults.2

With their disposable income reduced due to rising prices, respondents said they plan to spend, on average, 39% less on holiday shopping than in 2022. Many will finance their spending differently too. One in three said they’re considering going into credit card debt to fund purchases. Slightly more (34%) said they’re thinking about using their savings to fund purchases, while considerably more (41%) may opt for Buy Now, Pay Later services.

However, it’s not just rising product prices that are driving changes. Rising delivery costs are also problematic. 64% said if delivery costs increased, they would reduce their cart spend to offset them. The same percentage said they would switch to shopping only in bricks-and-mortar stores, while 60% said they would limit themselves to online retailers that offer free shipping.

Following shipping problems in 2022, 35% said they might decide not to purchase from a retailer because of the shipping carrier they use. The biggest complaints from last year included lack of communication (57%), lost or damaged packages (51%), delayed packages (49%) and unpleasant delivery people (41%).

Even with consumers cutting back, a retailer’s choice of delivery provider remains extremely important.

Online fashion and beauty generates €122 billion

The European online fashion and beauty market generated 122 billion euros in turnover in 2022, 45 billion of which was cross-border3, according to data from the second edition of ‘Top 250 Fashion & Beauty Retail Europe.'

However, the market is only expected to grow by another 18% by 2026 – considerably less than the 2022 prediction of 50% to 2025. Growth has been slowed by inflation and supply chain disruptions.

Fashion and beauty accounted for 17% of the total online B2C retail market of €729 billion. Nearly half of all online fashion transactions were on marketplaces. And 12% of them were from C2C resale platforms like Vinted, a share which is expected to grow and make up one sixth of online fashion sales in 2026.

Are free returns finally ending?

H&M, the Swedish fashion giant, has become the latest big brand reported to have introduced a charge (in the UK) to return parcels either in store or online. The cost is taken from the customer’s refund – although returns will remain free of charge for H&M members4.

Not surprisingly, customers will not be charged if items are faulty or incorrect. On their website, H&M encourages customers to indicate this when registering their returns.

H&M’s returns charge was introduced quietly during the summer, but only recently reported. Retail analyst Jonathan De Mello commented:

“It’s interesting that companies are doing it by stealth, but it’s a sensible thing to be doing. It makes economic sense, as it discourages shoppers from bulk buying online products and then returning the majority of them. That’s been a real problem for companies.”

After decades of free returns, a quarter of the 200 leading online retailers are now charging UK shoppers to return items, according to research by parcelLab. That’s an increase of 14% year on year.

Boohoo and Zara scrapped free returns last year, sparking a negative reaction from customers on social media, some of whom blamed inconsistent sizing and misleading website photography for having to return items. There may yet also be a backlash from groups such as disabled people, who rely on online shopping.

Retailers test generative AI on their websites

Brands including eBay, the Ghirardelli Chocolate Co, and now Newegg online consumer electronics are using generative AI to enhance product pages on their websites5.

Newegg’s generative AI tool summarizes a product’s reviews into one succinct comment, called SummaryAI, which is displayed above the individual reviews. The tool also shows ‘Pros’ and ‘Cons’ for each product, again taken from the published reviews. These are called ‘Review Bytes’. 

Andrew Choi, Newegg’s director of brand and website experience, commented:

“We feel this would be helpful for many customers who are looking for quicker analysis.”

Many other brands are experimenting with generative AI to enhance their websites, by creating pages faster and optimizing pages for conversion – although most haven’t yet made the results public.

In retail, interest in AI is huge. In a pre-ChatGPT survey from Digital Commerce 360, 26% of retailers said they would be investing more in AI in 2023 than the previous year. After the release of ChatGPT, that percentage is likely to be far higher.

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