In order to remain competitive, more and more retailers are finding they must be present in the physical and digital worlds. But the evolving omnichannel business model combining brick-and-mortar retail with e-commerce is making order fulfilment more complex for logistics providers.
By BEUMER Group
What are the changes in the omnichannel world that logistics providers ought to be aware of and take into account when planning their business operations?
The biggest shift in the landscape that all fulfilment centres are well aware of, is of course the soaring growth of e-commerce which was further accelerated by the global pandemic. This growth propelled many traditional retailers into establishing online stores to complement their physical stores in order to compete in the online world and reach more customers.
But there have been other major shifts also.
One of the trends in omnichannel is the move of some pure online players to establish a physical presence also. Amazon, for example, announced in September 2021 that it was planning to roll out around 80 physical stores.
There are a number of reasons why online players are moving into physical spaces.
The first is obvious: they want to reach new customers. Secondly, they wish to create a physical space from which they can fulfil online orders. Thirdly, by moving into physical stores, these retailers can test technology. Amazon has been testing its Scan and Go, a cashier-free experience. Others, such as Nordstrom and Target, are testing virtual dressing through their showrooms or guideshops.
Source: MIT Center for Transportation and Logistics – Dr Eva Ponce [timestamp: 11:56]
The main reason why pure online players are getting physical, however, is to deal with the increasing challenge of reverse logistics. In the fashion industry, in particular, returns represent 40-60 percent of all sales, and that continues to grow as e-commerce grows. Having a physical presence is an easier way for retailers to handle returns. If you can want to find out how to reduce manual intervention when handling returns, you can read more here.
Despite the tendency for consumers to come back to the stores, omnichannel retail still seems to be the perfect business case.
But even in omnichannel retail, various hybrid channels are emerging.
In a recent survey in which it asked which distribution channels companies were offering, MIT Center for Transportation and Logistics noted that about 40 percent were now providing home delivery, while about 60 percent are providing click and collect. Click and collect is in fact a growing distribution option that is gaining market share.
Source: MIT
According to the MIT Center for Transportation and Logistics, kerbside pickup is particularly prevalent in the click and collect distribution channel, especially in the grocery industry.
Companies are also currently experimenting with dark stores. Rather than being laid out for customers, these stores are optimised for pickers to prepare online orders. Dark stores are typically located close to the end customer, in order to achieve faster deliveries. They are prevalent in the grocery industry, although other industries such as apparel are also piloting dark stores to fulfil online orders.
But omnichannel distribution is not just about integrating online and offline channels or its many hybrids. It also refers to creating a seamless customer experience. Many of the changes we are seeing in omnichannel, therefore, are driven by companies seeking to provide a seamless omnichannel customer experience.
Companies such as Adidas are actively implementing new initiatives, such as the endless aisle – the concept of ordering items online for shoppers that visit a physical store. Through their stores, retailers can show what they have in their fulfilment centres, enabling the shopper to buy on their online stores and receive at home.
The mobile point of sale (POS) system is another trend that bricks and mortar retailers especially are providing in order to give their customers a better in-person experience. The system simply turns a smartphone or tablet into a cash register, allowing retailers to accept payments anywhere within their stores. It just requires a mobile device and an internet connection.
There is also much movement in adopting automation technologies and creating next generation e-fulfilment centres. Some are already developing collaborative robots that can help pickers prepare online orders. Collaborative robotic technology combines manual with some form of automated assistance in order to achieve greater efficiency and speed.
Bonobos (an upscale, e-commerce-driven apparel subsidiary of Walmart in the US), for example, has recently deployed 70 robots to assist with its online orders.
Companies are heavily investing in automation, such that a purely online channel is now able to prepare a 45-50 item order in just two to three minutes, gaining greater efficiencies based on automated solutions.
Companies are also investing in real-time inventory visibility. Take Zara, for example. It is able to identify every single item in its inventory using RFID technology, letting it know exactly where its inventory is at all stages of the supply chain – their stores, distribution centres, intermediate depots and so on.
Micro fulfilment centres are also cropping up in order fulfilment. These centres are fully automated smaller spaces, usually co-located in the store or very close to the store location. Like dark stores, these centres provide efficient and faster ways to prepare and deliver online orders.
We’ve outlined some of the dominant trends that can be observed in the omnichannel distribution space today. But of course, the face of omnichannel continues to evolve as retailers concentrate on upgrading and redesigning their networks to integrate online and offline channels in order to compete in today’s retail environment and address their omnichannel challenges.
As MIT has noted, retailers will continue to make tradeoffs between distance, cost and fulfilment capacity. Fulfilment centres must therefore keep a close eye on this changing space in order to meet their customers’ changing needs.
