I recently read a Wall Street Journal article titled “Online Shoppers Want Delivery Faster, Cheaper, Survey Shows,” and one of the major findings is that consumers are now expecting even quicker delivery of products ordered online. No disrespect to the author of the article or the supporting study, but I would venture to guess that any consumer wouldn’t find that very surprising. In the age of free shipping and returns, Amazon Prime 2-day delivery, same-day delivery and now 2-hour delivery, consumer expectations have driven retailers to fundamentally rethink and reinvest in their distribution approach – even those retailers whose main focus continue to be on brick-and-mortar.
Parker Avery recently published a new case study, “Distribution Center Integration Design, Requirements & Roadmap,” which outlines how we helped a retailer develop a roadmap and initiate a pilot to consolidate the distribution centers of the company’s two largest banners through a myriad of system integrations and business process redesigns. The effort required rigorous project management and facilitated collaboration between the two different businesses to ensure the company would ultimately realize significant distribution-related efficiencies and cost savings – to the tune of close to $50 million annually, when fully implemented across the enterprise.
While this particular retailer does have an eCommerce presence, it is not a key focus area for their growth. Their target demographic is a consumer who patronizes their stores for the low cost and wide variety of products, as well as convenience of their many locations, which are typically in strip malls and easy-access stand-alone locations. While much of the cost savings related to the consolidation of their distribution center operations and streamlined logistics (in terms of stem mile savings) will go directly to the parent company’s bottom line – making their shareholders very happy – there are likely opportunities to also pass some of these savings on to consumers in terms of even lower prices.
But I venture to guess the bigger opportunity from a consumer perspective is in terms of product availability. A critical element in maintaining consumer loyalty is to consistently deliver on expectations – this means in terms of not just the store environment, operational efficiency and associate effectiveness, but more in terms of having the product in stock – and in the expected place in the store (or otherwise easy to find) – when a customer wants to purchase it. The above-referenced WSJ article noted that consumer delivery expectations of online retailers have decreased from an average of 5.5 days in 2012 to 4.8 days. While that may be notable, when a shopper makes the effort to assemble their shopping list, carve out precious time in their busy schedule, gather their kids, car keys, phone and wallet, drive to a store, find a parking space, and trek into the store for items that they need – they’ve invested much more time and personal resources than simply browsing and clicking. Their “delivery expectation” is much less than 4.8 days – or even 2 hours – it is now, immediate, pronto.
A notable statement from the WSJ article, “Consumers increasingly make their buying decisions based on convenience when shopping across more categories—pushing retailers to upgrade their supply chains and delivery networks to accommodate the changing demands.” This assertion has vast implications to retailers of all sorts in terms of assessing and modernizing their legacy system environments, new integration requirements, cross-channel considerations, labor alignment, inventory optimization, capital investment priorities, and more.
We often read about retailers who are focusing more efforts on expanding their eCommerce channels – and of course the ubiquitous “omnichannel” experience – to meet heightened customer expectations through more fulfillment options and faster delivery. However, retailers who are strategically and solidly positioned to deliver on the traditional in-store shopping trip are also finding ways to capture more wallet share through ensuring product availability, solidifying in-stock positions and optimizing assortments. Our distribution center consolidation case study is a great example.
This focus is also underpinned in the WSJ’s notation that, “delivery of groceries, pet supplies, auto parts and cleaning supplies were among the least likely categories to be ordered for delivery…with 70% of respondents having no plan to use grocery delivery services.” Certainly an interesting finding, given Amazon’s 2-hour service offering and the fact that some of the larger grocers are exploring or have implemented curb-side pickup and / or home delivery. However, Target recently realized this antipathy and discontinued plans for its curb-side pickup service, opting instead to focus on its digital-stores offerings like Cartwheel, Order Pickup and shipping online orders from stores.
What I find interesting is the constant push and pull of the retail industry’s focus – as well as how retail analysts and media cover it. Yes, everyone seems to need a digital presence – although this varies widely across the industry. But regardless of the business model or channels supported, the fundamentals of retail still must be in place: the right product in the right place at the right time. Evaluation of ways to find behind-the-scenes efficiencies can have dramatic effects on meeting consumer expectations and driving meaningful bottom line results.