With the Retail Industry Leaders Association’s annual supply chain conference around the corner, here are the top trends shaping the retail supply chain.
In a world where next-day and same-day deliveries have become “the new normal,” and where solutions provider Zebra is predicting that by 2028, 40% of parcels will be delivered within 2-hour timeframes, the race is on to develop faster, more efficient supply chain processes.
“For supply chain executives, this means selectively adopting emerging technologies, rapidly developing urban fulfillment processes, and actively building strategic relationships with logistics service providers,” RILA states on its website.
The Key Drivers
From logistics to warehousing to transportation, the components that drive these supply chains must work in sync with one another to fulfill consumers’ e-commerce, omni-channel, and bricks-and-mortar needs. Here are six more trends impacting the retail supply chain right now and shaping tomorrow’s retail logistics environment:
- Moving online, offline, and mobile under the same umbrella. According to the International Council of Shopping Centers (ICSC), 84% of millennial buyers research a product online before going to a store, and 87 % of them use a mobile device in-store to compare prices and get digital discounts or coupons. In fact, an Internet Retailer survey revealed that 73% of respondents opt to buy online but pick up in-store “to avoid shipping fees.” This creates opportunity for retailers that can harness those in-store mobile phone-toting shoppers, as well as those who come to the store for pickup (and wind up leaving with products that weren’t even on their shopping lists).
- Placing product assortment closer to demand. As retailers and brands seek to enhance the direct-to-consumer value proposition and compete for e-commerce share, they are constantly working to offer a larger assortment and reduce delivery lead time, consulting firm A.T. Kearney reports. Subsequently, both retailers and brands are forward-deploying a wider mix of stock-keeping units (SKUs) to fulfillment centers, where piece-picking of individual SKUs for orders (eaches picking) takes place. “The most aggressive example of this trend is Amazon, which invested more than $13 billion to activate 50 eaches picking warehouses across the U.S. from 2010 to 2016,” A.T. Kearney points out. “This massive investment has allowed Amazon to offer hundreds of thousands of SKUs and promise customers next-day delivery of them all.”
- Catering to a growing demand for tailored, customized products. RILA says today’s shopper is looking for products and services tailored to her and that provide value. In fact, a recent Segment report found that 45% of surveyed consumers are likely to repeat a “personalized shopping experience,” such as receiving a special discount. “Clothing and shoes used to be individually made for their users, by cobblers or tailors and dressmakers,” Wiivv’s Shamil Hargovan told “When mass production hit, that’s when customization was lost.” This puts an interesting twist on the retail supply chain, which was historically designed around delivering full pallets of products to stores which, in turn, would stock their shelves with the inventory. Now, innovative retailers are even using unused floor/backroom space for fulfilling e-commerce orders (and taking back returns). They’re also working with their logistics providers to come up with more efficient ways to fulfill and deliver highly-personalized orders (right down to a single tube of Chapstick).
- Creating easy delivery and/or pickup and subscription options. “Significant shipping costs or cumbersome tracking can be a burden on shoppers,” RILA points out, noting that Dick’s Sporting Goods is embracing the trend by making in-store pickups easier with self-service stations. Customers can scan the bar code at the top of their “ready to pick up” email or type in their name on the interactive touchpad screen and an associate will bring over the purchase. RILA says retailers that want to emulate Dick’s success in this area should ask themselves questions like: Should we develop our own rapid-fulfillment digital shopping platform or partner with an established one? Are our delivery estimate options accurate, and how do we notify the customer if things change?
- Integrating retail and the “sharing” economy. As consumers continue to shift spending from “things” to “experiences,” the impulse to simply rent what they need when they need it will grow, RILA predicts. For retailers and their landlords, designing centers and parking areas/structures that can be adapted to respond to these cultural shifts will be critical to their long-term success. Mall owner Westfield, for example, recently formed a national partnership with Uber that will include designated drop-off and pickup stations at 33 U.S. malls. “The initiative will also create ultramodern, amenity-rich lounges,” RILA points out, “where customers can wait for their rides to arrive.”
- Leveraging the Uberization of transportation. In How will E-commerce growth impact our transportation network?, the Texas A&M Transportation Institute paints a picture of a retail environment where e-tailers are upending long-established business models and the shopping patterns of consumers. Those consumers are increasingly choosing shorter delivery cycles, it points out, opting in some cases to receive their goods within hours rather than days. “The demand for more immediate delivery requires retailers to be nimbler and radically changes warehousing logistics,” the institute states. To offset these challenges, retailers are adding smaller sorting and delivery hubs and locating them closer to their customers. “Moreover, while retailers continue to employ traditional delivery services,” the Institute points out, “they also are looking to independent contractors who use personal vehicles to transport packages in the same way that transportation network companies like Uber ferry passengers.”
With consumers spending $453.46 billion on the web for retail purchases in 2017—a number that’s expected to grow this year—retailers continue to hone their supply chains in a way that not only meets the needs of their bricks-and-mortar customers, but also caters to their online/mobile buyers. It’s not an easy charge, but those companies that put the time and effort into developing transportation, warehousing, and logistics approaches will come out the winners.