Shopping economics: Today it's all about delivery fees and voucher rights

Looking at video clips of queues outside popular shops like Ikea and Penneys, observers could be forgiven for thinking that the retail sector is thriving.

But those queues were the result of pent-up demand and limits on the number of consumers inside the shops at any one time, plus the fact that the online shopping option is either unavailable (Penneys) or involves additional expense (it’s at least €49 for furniture delivery from Ikea).

Online and offline, these are uncertain, unusual times for consumers and retailers alike. Most shops are open again, but the experience of browsing in more cramped spaces can be a tense one, while a combination of spaced-out store layouts and retailers’ order cancellations means not everything will be in stock just yet.

The ability to freely try on clothes or even touch certain items will also be restricted in some stores, removing a key edge that physical shopping had over its online equivalent. Many ecommerce sites continue to warn, however, that their deliveries will be subject to delays.

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The medium-term problem of consumer affordability also lurks. Even if the dramatic 74 per cent monthly drop in clothing and footwear sales in April (and an even more horrific 86 per cent year-on-year drop compared to April 2019, according to Central Statistics Office figures) is unlikely to be repeated, households suffering a sudden drop in their incomes or living under the cloud of threatened pay cuts and redundancies later in the year will be curbing their enthusiasm to spend.

And for those who are willing and able to reacquaint themselves with discretionary purchases, the economics of shopping may be more important than ever.

Summer sales

Retail body Retail Excellence has forecast initial post-lockdown spending will be followed by a “subdued demand phase” in which consumers “return to hibernation” and consumption is limited by both financial prudence and health and safety concerns.

It won't only be spring fashions that retailers are desperately trying to shift. It's also those items where demand is yet to return to normal

To persuade shoppers back and rid themselves of unwanted stock, retailers just about everywhere are expected to turn to heavy discounting. While July is traditionally the month when summer sales begin in earnest, some retailers have opened up with mini-sales, not unlike those seen in mid-June 2010 when the State was reeling from the financial crisis.

For example, department stores Brown Thomas and Arnotts, which are owned by the same group, both have 40 per cent off selected clothing and accessories and 50 per cent off certain homeware products, while Marks & Spencer has 50 per cent off some lines.

At Spanish fashion giant Zara and the Swedish trio of H&M, Cos Stores and & Other Stories, 50 per cent discounts are also in evidence, notwithstanding the fact that the Republic-based stores of some of their rivals – among them the UK chains Oasis, Warehouse, Monsoon, Accessorize, Laura Ashley and Cath Kidston, as well as department store chain Debenhams – have not survived the Covid-19 crisis.

Online, there’s another way to buy more for less. According to an Ulster Bank survey conducted at the end of May, a third of Irish people shopped for more clothes online than they did before the pandemic restrictions: if they tried a site for the first time, they may have helped themselves to email sign-up or website registration discounts of 10-30 per cent.

It won’t only be spring fashions that retailers are desperately trying to shift. It’s also those items where demand is yet to return to normal, such as occasion wear, work wear and anything that really only belongs in a suitcase headed for a distinctly un-Irish climate.

Online delivery charges

Penneys is unusual among clothing chains in not selling online: it has long maintained that the ecommerce model is uneconomical for its business because delivery costs are neither comfortably absorbed into its low margins nor easily passed onto shoppers seeking rock-bottom prices.

Across the middle and upper end of the market, a wide variety of online delivery charges apply.

Lifestyle Sports is notable in offering free delivery on all orders, including to those made to Parcel Motel pick-up points. French sports clothing and equipment retailer Decathlon, which opened its first Irish outlet in Ballymun earlier this month, charges €3.90 for An Post-delivered orders that weigh up to 6.5kg, with free delivery below this weight where the value of the order exceeds €50. If it's a bulky order, it uses a delivery company called B Logistics, with the prices ranging from €9.90 to €24.90, depending on weight.

Decathlon has put a note on its website saying that “due to the high volume of orders, we are currently experiencing some delivery delays”, suggesting its pandemic-delayed launch hasn’t gone too badly at all.

Electronics retailers Currys PC World and Harvey Norman have the same charging structure of €5.99 for small items and €24.99 for larger items, though at Harvey Norman it will cost €69 to deliver furniture and bedding (putting that €49 charge at Ikea into perspective).

Dunnes Stores offers free delivery on orders over €50, otherwise it is the standard €3.95 charge. Marks & Spencer charges €3.95, with free delivery kicking in orders over €30: shoppers who want express delivery or for items to arrive on a nominated day will pay €9.95, unless the order is over €59, in which case it is again free.

At Arnotts, delivery of online orders costs €4, while at Brown Thomas, which has suspended its express delivery option and has warned of a “smaller selection” of stock than normal, it is €3.50.

Brown Thomas also has an annual delivery membership, a phenomenon that is becoming increasingly common across the fashion and department store sector as they try to encourage and reward repeat custom. For €14.95, customers will receive unlimited standard delivery on all orders from its website for 12 months.

Similar schemes are also in operation at UK online-only fast fashion retailers Asos and Boohoo. At Asos, delivery to addresses in the Republic is €3 or free over €42, but for express deliveries, the charge is €5, while for next-day or nominated-day arrivals it is €12. Regular purchasers may be swayed, however, by the €18.99 "premier delivery" option, which offers unlimited next-day delivery at no further cost for a year. The "next day" element of this is, unsurprisingly, subject to "remote area restrictions".

Boohoo, run by Irishman John Lyttle, charges €11.99 for 12 months of unlimited delivery, plus free returns too, which is still much rarer than it should be. On a per order basis, its delivery charges in the Republic are €6.99 standard and €9.99 express, not insignificant charges given the relatively low price point of its product.

However, the company has gained traction in the Irish market in part by occupying the online space left vacant by Penneys, and last week it acquired the ecommerce businesses of the Oasis and Warehouse brands, the plan being to integrate them with its own platform.

Other UK-owned clothing e-tailers tend to quote products and shipping charges in sterling: at Boden, for example, the shipping cost is £6 (€6.60) per order, while at Finery London it is £8 (€8.85).

Sterling translation

Speaking of sterling translation, consumers will periodically have to watch out for signs that falls in the value of sterling versus the euro are actually reflected in the price tags of UK retailers operating here. This became an irritating phenomenon after the 2016 Brexit referendum, when sterling collapsed and the euro prices charged by UK retailers should have dropped accordingly but in many cases did not.

For consumers in the Republic, it made cross-border shopping more attractive, with the reverse being true for consumers in the North. A longstanding frustration, however, is that the majority of UK retailers with special euro websites prevent shoppers with delivery addresses in the Republic from buying in sterling – something that would still often work out cheaper even with shipping and currency exchange charges.

Although sterling has recovered since 2016, UK retailers are still noticeably cheaper in the sterling zone

These mark-ups have boosted the popularity of retailers of euro zone origin among shoppers, who have registered the relative expense of the UK chains.

Certain behemoths of online retail – cough, Amazon, cough – place prominent currency converter buttons to encourage Irish shoppers to place their order in euro rather than sterling, but it will often be better to pay in sterling and let your card issuer do the translation.

Although sterling has recovered since 2016, UK retailers are still noticeably cheaper in the sterling zone. Take, for example, the Autograph premium leather bag range billed as a thoughtful Father’s Day gift by Marks & Spencer: the weekend bag sells for £149 on the UK site, but €199 in the Republic, when the exchange rate (as of Friday) should put it closer to €164. For a briefcase, £109 translates to €149 when it by rights should be around the €121 mark.

Neither sterling's wobbles nor the thorn of Brexit have quite gone away. If the UK and the European Union fail to agree a deal by December 31st and Westminster continues to refuse to extend this transition period, then shoppers in the Republic could wind up paying duties and VAT on "imported" goods, similar to those applied to purchases from the US.

The larger ecommerce players will likely set up Irish or European companies to avoid this and it will be the smaller or independent shops both in the UK and the Republic that lose out.

Gift voucher rights

News reports on the first days of post-lockdown retail trading quoted shoppers who said they were armed with gift vouchers, perhaps received at Christmas, that they didn’t have the opportunity to spend before the shutters abruptly came down in March.

Protections for gift voucher holders have recently improved. Under legislation that came into effect on December 2nd, 2019, expiry dates on vouchers should be at least five years and the expiry date should be available to the holder “in a durable form”, meaning in writing or email.

The Competition and Consumer Protection Commission recommends paying for vouchers with a debit or credit card as it might afford extra protection

Retailers also shouldn’t oblige holders of gift vouchers to use them in one transaction, nor should they prevent customers from using more than one gift voucher in a single transaction.

Not all vouchers are covered by the legislation: for example, the multi-store One4All cards are considered “electronic money cards” and technically do not expire, although the card may have to be reissued in order to shop online after its “valid thru” date. In common with some shopping gift cards, One4All levies an “inactive balance charge”, which in its case is €1.45 a month once the card is dormant for a year after being issued.

The Competition and Consumer Protection Commission recommends paying for vouchers with a debit or credit card as it might afford extra protection if the business closes down before the voucher can be used. In theory, the purchaser can request a chargeback from their bank card provider.

In practice, the holder of the gift card may be reluctant to seek redress through the person who kindly gave them the card in the first place and will likely stomach the loss. Regardless of the expiry date, it is sensible to spend vouchers sooner rather than later or else it could get messy.