We recently heard someone say that the Coronavirus didn’t disrupt retail—it actually accelerated retail. We couldn’t agree more.
Brands have been catapulted into a dramatic state of responding to consumer (and government) demands all while testing, learning, replenishing, cleaning, BOPISing, etc. Brands that thought they knew what omni-channel meant have been put to the test as we see retailers offering more integrated online to offline services, fulfillment and communication.
Terms that many brands were just starting to explore—micro fulfillment center, dark store, automation—are now becoming a part of everyday conversations. Consumers don’t care what you call it, as long as you get them the products they need and want when, where and how they want them. In fact, consumers are one (or four) steps ahead of most retailers right now.
At WD Partners, we wanted to learn more about this major gap between consumer expectations and brands’ lagging response. We recently (post-COVID) fielded a survey of 2,100 Americans to explore just how willing consumers are to shop some of these alternate formats being tested by some big names. Respondents rated the likelihood of purchasing from a pickup only/dark store in various categories and revealed they are very open to the idea especially in the restaurant, big box and grocery verticals.
Some retailers already get it. In a recent earnings call for Target, the brand revealed that sales fulfilled by their same-day options grew more than 90% last year. Both outpacing the demand for shipping and driving the majority of their digital growth. And because their same-day services have better economics than two-day shipping, their average fulfillment cost per unit came down nearly 25% over the past year (read: better margins)1.
Target has made significant investments in their supply chain in order to better support their stores as both shopping destinations AND fulfillment hubs. They’ve taken their operations to the next level, sending stores the right amount of product when they need it and simplifying how that product is moved from truck to shelf. In fact, their stores are handling (aka fulfilling) 80% of their online volume.
Automation is another idea popping up in headlines and conversations with more frequency. A new report shows the warehouse automation market is expected to more than double, from $13 billion in 2018 to $27 billion by 2025. Why should brands pay attention? Because the current boom in e-commerce is compounding the major labor challenges faced by the global logistics industry. It’s projected that existing fully automated systems can reduce warehouse-related labor costs by up to 65% and logistics-related spatial use by up to 60% at the same time as it increases the maximum output capacity2.
Yet the need for updated warehouse technology solutions is not new. Before the coronavirus, e-commerce had already been growing. Post-COVID, 45% of consumers said online shopping will be a “necessity” for them to live their daily lives and 94% stated online shopping will be an important activity during the current crisis according to RSR’s March 2020 consumer survey3. The Census Bureau of the Department of Commerce released eCommerce figures for first quarter of 2020 that showed an increase of nearly 15% over the same time period last year—and that only captured roughly two weeks of the full effect the pandemic had on US retail4.
With the efficiency brought along by warehouse tech, a natural next step is a hybrid fulfillment store solution. Dark stores are appealing to customers. Micro-fulfillment centers allow brands to increase margins while decreasing fulfillment costs. And ecommerce is growing at a rapid clip creating more opportunities for automation, supply chain efficiencies and operational excellence. So where is the disconnect for brands? Perhaps it can be explained by the traditional way companies are organized.
To be honest, you’re organized wrong. Your company is following an old organizational model and you can’t meet the speed of the new customer experience.
In the visualization above is there an “owner” of BOPIS? Or does it kind of fall in the eCom leaders responsibility as well as IT, Ops and Design?! Sounds like a real opportunity for a cluster-you-know-what. When disciplines are siloed, leaders only focus on their area of expertise rather than the customer journey in total and how best to meet their needs whether instore, online, in their car, or on their phone.
Our recommendation…reorganize around the consumer. Take those key moments of distribution and consumer interaction and carry them through across your traditional departments.
By adopting and integrating technology you’ll create new points of interaction and synergies for both your company and your consumers. Start by placing less emphasis on specific disciplines and more on the holistic solutions. Organize sideways and horizontally, bringing teams together to execute on innovations. Instead of pulling someone from each vertical function or silo, bring together an entire new team—one that’s empowered from the top to execute.
The acceleration of retail is real. For now, temporary adjustments to help fulfill online orders and to serve curbside customers will help retailers maintain operational status, but future growth depends on thinking completely differently—like a 21st century business. If you’d like to talk about next steps for your organization, contact Joanne Heyob at Joanne.Heyob@wdpartners.com.