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Retail Sales Rose Again in March—Here’s How Stores Can Do Better
Vicki M. Young
7 min read
U.S. retail sales rose for the second straight month, but specialty and department store retailers weren’t so lucky.
Specialty apparel and accessories retailers lost ground, with sales in March down 2 percent to $26.04 billion from $26.46 billion in February on a seasonally adjusted basis. Sales at department stores were down 1 percent to $10.92 billion from $11.04 billion. The clear winner was the nonstore retailer category, which includes online e-tailers, where sales climbed 3 percent to $122.97 billion from $119.7 billion. Overall retail sales in March grew 1 percent to $709.59 billion from a revised $704.53 billion in February, seasonally adjusted.
The data report on Monday from the Commerce Department suggests continued strong spending by consumers, a factoid that gives evidence that the U.S. economy is still on solid footing and could mean that the Federal Reserve might not be lowering interest rates until later in the back half of 2024.
Two recent studies show that regardless of where consumer spending ends up in 2024, there’s still work that retailers can do to grab market share.
ShipStation: Shipping, returns remain pain points
Consumers seem to want it all, expecting brands to be everywhere they are. Free shipping—preferably either overnight or next day, within 2 days or, at the latest, 3 to 4 days—and easy returns, even if they have to pay more for it, top consumers’ list of wants.
Globally, the average standard delivery time is 3 to 4 days at 46 percent, followed by 2 days at 24 percent. Ranking third is 5 to 7 days at 18 percent, followed by same day or next day at 9 percent. The study found that digitally native shoppers, those under age 45, are willing to pay for speed, especially in big cities. Thus, charging a small fee—$7 to $9—for premium delivery is where retailers can boost profits, while still satisfying customers.
Shoppers globally want delivery updates, preferably on their phones and apps as Gen Z craves real time statuses. Tracking that incorporates live GPS and exact arrival times is the future, giving total control for the customer is paramount. And retailers who step up with real-time transparency have a good shot at winning customer loyalty, ShipStation’s data indicated. While consumers typically choose to have items shipped to their homes, options for out-of-home delivery—think lockers, click-and-collect and other pick-up points—are gaining momentum in the U.S. among younger shoppers. Those options represent a win for retailers due to lower shipping costs and streamlined fulfillment operations, the study concluded.
Easier returns are also top of mind, and the study found that options such as carrier pickup, drop-off locations and physical stores are preferred by 80 percent of U.S. consumers.
“Our study shows that in the US, most people like to browse and research apparel online first. But when it’s time to buy, it’s a 50-50 split: half will buy online, and half go to the store before making their final purchase decision,” Krish Iyer, ShipStation’s vice president, strategic partners & industry relations, said.
Iyer said apparel has the highest return rate of any category in the study. “This is especially true among Millennial and Gen-Z consumers, who globally return about 20 percent of their apparel purchases each year,” she said. “Apparel is also the only category where consumers prefer to return items in-store. This is likely because the original packaging is often damaged, they don’t have the right supplies to send it back, and likely have to pay a return shipping fee.”
According to Iyer, retailers should think about making the return of online apparel purchases easier for consumers. “Forty-two percent of surveyed U.S. consumers said they’d be less likely to shop with a brand in the future if they encountered an inconvenient returns policy,” she said, adding that online-only retailers should consider forming partnerships with entities that offer physical drop-off points to make returns easier without the need for original packaging.
With shoppers treating free returns on online purchases as “try-ons, not commitments,” retailers are drowning in costs of about $33 per return. Adding a return charge is a move that’s approved by 53 percent of Gen Z consumers between ages 18 to 24 because they think “fast, easy returns are worth paying for.”
But ShipStation cautioned that implementing a return fee to existing customers could drive unintended behavior. “Shoppers are likely to avoid them by returning items in-store, reducing purchase frequency with the brand, or strategically utilizing loyalty programs to offset costs,” the study found.
ShipStation said the smarter play is to charge for online returns and keep in-store returns free. That’s a move that can benefit retailers by getting shoppers in the door, where they are likely to spend more on exchanges or new items. Another option is making returns a free perk for loyalty members, which rewards a retailer’s best customers and protects profits from the “casual returners.”
Bluecore: 20.2% is average repeat purchase rate in apparel
Retaining repeat buyers is a core driver of a retailer’s health.
A report from Bluecore surveyed 100 retailers and found that those who understood their shoppers are better able to effectively “nurture” them through the lifecycle. Bluecore uses a metric called identification rate (ID rate), or the percentage of website visitors that can be recognized by email address or phone number and then matched to previously collected behavior. The ID rate in apparel is 27 percent and in footwear is 17.5 percent. Bluecore said apparel purchase frequency has the strongest ID rate due to the number of times a shopper visits a website, which in turn provides more opportunities for a retailer to identify them.
Retailers with average ID rates above 40 percent saw repeat purchase rates at 53 percent higher than average. Moreover, average repeat purchase rates in apparel were 20.2 percent, while active buyers across all shopping categories placed 57.6 percent more orders—and spent 69.2 percent more—than new buyers.
The ID rate is important because the more often a retailer can “recognize” a shopper in the acquisition phase, the greater the chance it can tailor the shopping experience based on past preferences and behaviors to drive repeat buying during the retention phase. And recognizing browsing and searching behavior allows the retailer to message and engage the shopper to get them to buy, which can convert a non-buyer to a first-time buyer. The average order value spent by new customers is $116.66 for apparel and $105.50 for footwear. In addition, the number of orders per new buyer averages 1.45 for apparel during the first year and 1.28 for footwear.
The study also found that lapsed customers can be a hidden opportunity for retailers. That’s because they’re more valuable than new customers. Customer reactivation rates averaged 8.5 percent in apparel, with beauty leading at 9.2 percent. Sales per reactivated buyer are 12.7 percent higher—and purchase frequency is 7.7 percent higher—than those from new buyers.
Carhartt has been working with Bluecore to increase its ID rates to create a more engaged customer base, said Jennifer Slegers, the retailer’s CRM director. “By focusing on increasing identification rates, we have been able to reach more shoppers and create more personalized shopping experiences across channels, resulting in higher sales. With implementing these new strategies, we exceeded our digital revenue goals for holiday sales,” she said.
On average, 35 percent of sales across Bluecore’s customer base is from the top quartile of shoppers. That’s another reason why engagement is a continuous process and lapsed customers need to be reactivated. It found that loyalty pays, with the average third-year customer retention rate of 43.2 percent in apparel and 28 percent in footwear.
Slegers said Carhartt’s loyalty program Groundbreakers gives members early access to new gear, free U.S. ground shipping on all orders, dedicated customer service, and cash-back rewards, among other benefits.
“Through tailored and relevant messaging to members, loyalty members spend approximately 20 percent more than non-members. Additionally, with more personalized audience targeting and messaging, we’ve seen increased retention among the membership group,” Slegers said.
