Free ecommerce shipping, online sales, supply chain impact

An article in the New York Times (Jan 4, 2012) describes the 15 % growth in ecommerce sales this year compared to last year. 92% of the online sites offered free shipping and retruns. The resulting surge caused FedEx to add 20,000 people and UPS to add 55,000 people. But return rates are expected  to increase 7.7% over last year.  Since shipping individual units is expensive, compared to customer pickup at stores, who will bear the associated increased costs in the supply chain ? Since ease of returns may increase return rates over brick and mortar stores, how will the cost to manage returns impact overall supply chain costs ? Should one expect the savings from elimination of physical stores and associated personnel to maintain sales levels and overall profitability ?

About aviyer2010

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