In many ways these findings raise more questions than answers. Further research is likely required to more closely understand the approach of the retail sector to the capture of online and store sales and how these impact sales at a physical level.

However it is becoming ever more clear that the days of ‘bricks vs clicks’ are disappearing with digital and physical sales beginning to merge. In addition, the implications from an occupier, owner and regional perspective differ somewhat.

Occupier Perspective

From an occupier’s perspective, with operational costs on the increase, margins being squeezed as well as limited store expansion, crediting a store for online sales within their catchment can help to boost that store’s performance.

However, there currently appears to be a disparity between the crediting of online sales to a store and penalisation for online returns. In addition, there are significant differences by category with, for example, Accessories stores nearly 10 times more likely to be penalised for online returns than to be credited for online sales.

In addition to the deduction of online returns from a store’s P&L, the staff resource required to deal with these returns (as well as click & collect orders) can be significant. With customer service becoming an ever more important factor to the in-store experience, many retailers are having to remove staff from the shop floor while at the same time having to deal with the very thing that is hampering the store’s profitability (i.e. the deduction of online returns from its bottom line). It is unclear whether this is a conscious or unconscious strategy among the different categories but it is clear this could be fatal to some physical stores if it continues.

Owner Perspective

From an owner’s perspective, these findings have implications for leases which rely on a store’s turnover as, in many instances, online sales are often not included.

Additionally, online returns are often deducted from official turnover with the consequent impact on rental income potentially significant. In the current climate (where rental growth is limited at best), this can often be the only way of securing this income and any shortfalls can have a major impact.

Owners therefore need to engage more closely with retailers to understand store performance as the better the performance, the more both sides are able to benefit. More than ever, owners and occupiers need to work together to ensure a win-win situation.

Regional Perspective

Geographically, there is clearly a north / south divide when it comes to the reconciliation of online sales and returns deductions. Stores in the North East are suffering most from the disparity and are least likely to be credited for online sales while at the same time being most likely to have online returns deducted from their sales figures. This is despite the North East having the second highest percentage of store sales from online.

Conversely, South East stores are most likely to have online sales credited to their store and are among the least likely to have online returns deducted from their bottom line. There could be an opportunity to address this disparity by adopting a more consistent / uniform approach to the online credit / deduction issue to avoid such geographical polarisation in performance.

Summary

A round up of category-level findings

^{Source: Savills Research}

^{Source: Savills Research}

^{Source: Savills Research}