News / Rising costs and low customer loyalty a double-whammy for online merchants

© Shao-chun Wang |

Consumer devotion to online shopping is still growing – but merchants are faced with the dilemma of balancing runaway costs with low customer loyalty.

Inflation, supply chain hiccups and the revival of the service sector have not dented demand for shopping, according to a new survey by PricewaterhhouseCoopers (PwC).

This month’s Global Consumer Insights Pulse Survey encapsulates input from 9,069 consumers across 25 countries and territories.

Contrary to predictions that online shopping would be affected by spending being redirected to activities like travel and events, the survey indicates a continuing preference for shopping, with a high degree of online purchases.

Over 75% of respondents expect to maintain or boost their spend in the next six months, and 50% reckon they will increase their online shopping.

This is most pronounced among younger consumers. Among millennials, 58% anticipate their online shopping to rise, as do 57% of members of Gen Z. Among baby boomers, on the other hand, only 32% envisage increased online shopping.

The willingness to spend more online does not extend across all categories of merchandise, though. While 47% of respondents expect to spend more on groceries, more than a quarter intend to cut back on some categories: some 37% plan to reduce spend on luxury and premium goods; 34% intend to spend less on dining out; and 30% will cut back on arts, culture and sports.

And one quarter of all respondents indicated plans to reduce spend on fashion.

While B2C e-commerce has remained strong, consumers are beginning to cut back on unnecessary expenses, noted Rick Watson, founder and CEO of e-commerce strategy consulting firm RMW Commerce Consulting. The first-quarter results of fashion firms were strong, but that was a matter of people updating their wardrobe, with celebrations like Easter and weddings coming up, and was not likely to be repeated in subsequent quarters, he believed.

The intention of consumers to spend less on cultural and sports events and dining out suggests the anticipated rebound in the services sector may be less robust than predicted. Moreover, 46% of respondents say they intend to cook more at home, and 41% will do more recreation/leisure activities at home.

The survey also raises questions about the widely predicted surge in international B2C business. Eight in 10 respondents expressed a willingness to pay a higher than average price for goods produced locally or domestically.

This tallies with a low tolerance for supply chain issues – first and foremost unavailability of products, but also extended delivery times. Many respondents expressed readiness to make changes in such cases, with 37% willing to turn to different retailers and 40% ready to use comparison sites to check product availability.

This indicates a relatively low level of consumer loyalty, which puts pressure on merchants not to disappoint consumer expectations.

Sabine Durant-Hayes, global consumer markets leader at PwC France, said: “Just as consumers continue to change their shopping behaviours and preferences, actively searching for the best shopping experience, retailers and manufacturers must move quickly to meet shifting demand and their own inflation and supply chain pressures. We don’t see these pressures easing anytime soon.

“Agile businesses that can manage through multiple disruptions while keeping their focus on the demands of their customers are in the best position to succeed in this tumultuous environment.”

For merchants, this is a difficult challenge. They have to perform a delicate balancing act as they try to meet consumer expectations while attempting to control their own costs and begin to charge shoppers for things like express delivery or returns. Even fashion brands Zara and Uniqlo have started levying fees for returns of online purchases.

“The free ride for unprofitable activities is largely ending,” Mr Watson confirmed.

For many players, this intensifies the push for omnichannel capabilities. Mr Watson noted that fulfilment from stores was turning into a huge growth engine. For Target, 50% of growth is in pick-ups in stores or kerbside, he pointed out.

“Even Amazon has opened stores for fashion. It needs omnichannel to complement its online business,” he said.

Meanwhile, younger consumers are beginning to turn to virtual reality (VR) for online shopping. Almost a third (32%) of PwC respondents that had used VR said they had purchased products after testing them via VR, and 19% had used it to buy luxury goods.

“The convergence of physical stores with online shopping over multiple devices has defined consumers’ omnichannel experience,” said Ms Durant-Hayes. “Now VR and the metaverse are adding an entirely new dimension.

“Although the metaverse is still an emerging channel, companies and retailers will increasingly need to consider it as part of their omnichannel presence,”