Golden opportunities for distributors in the "last mile" of omni-retail
By Chris H. Petersen
For today's consumers, omnichannel is their "new normal". They now shop and purchase anytime and everywhere. Power house ecommerce players, like Amazon, have made huge in roads in retail by selling and shipping consumers "on demand". What this means for traditional retailers is that they must become more flexible and "seamless". Consumers are demanding more in terms of expanded product range, as well as more choice in how to engage, where they want to purchase and take delivery. This creates a "perfect storm" of opportunity for distributors to play a strategic role in helping retailers to increase assortments, responsiveness, and fulfillment of the "last mile" all the way to the customer's door when they choose not to come to the store.
Why this is important: In order to survive and thrive, retailers are transforming to omnichannel. That will require new capabilities from distributors to in order to meet consumer expectations of more product choice and delivery on their terms.
The consumer has already decided – Anytime and everywhere
In the world of today's consumers, they do NOT think in terms of "channels". They expect the experience for online and stores to be seamless. What this means is an incredible transformation for retail logistics and fulfillment. Consumers no longer depend upon a specific time and place (store) to shop. They expect to be able to purchase online and pick up anywhere, or have it sent anywhere.
The essence of omnichannel retail is that the consumer is now in control of their experience, including purchase and place of delivery.
Amazon – Distributor Partner or the "Death Star"?
As more consumers turn to online for selection, price and speed of delivery, Amazon is turning to distributors in order to fill the gaps of getting the products delivered the "last mile" to the consumer's door. In most European countries where Amazon does not have all of its warehouses and infrastructure in place, Amazon has become a significant share of many distributor's fulfillment business.
Amazon is NOT just a retailer … in every respect Amazon is an evolving ecosystem focused on end to end, seamless fulfillment from the source to the consumers' door.
What is often overlooked is that Amazon has an incredible "Market Place" where it can test products and categories from third parties. When it finds a winner like Zappos (shoes), it acquires them. Amazon is also aggressively acquiring distribution warehouses, ships, planes and whatever it takes to deliver the goods across the globe. As more consumers shop omnichannel, Amazon has the potential to be the "Death Star" in terms of becoming the premier distribution ecosystem for omnichannel fulfillment in many countries.
Consider the following statistics from Slice Intelligence for the United States:
- Amazon alone accounted for 53% of the ecommerce growth in 2016
- Amazon accounted for 43% of the total online revenue in 2016
- Amazon accounted for 38% of online receipts in 2016
- Best Buy, a technology retailer, came in second with just 3.9% of 2016 receipts
With that kind of success and those kinds of volumes, Amazon can afford to build its own distribution system and logistics all the way from China's manufacturing plants to the local consumer, whether they purchase from Amazon or a market place retailer.
European retailers are investing in omnichannel … need partners
CONTEXT has been working throughout Western Europe to develop insights and analytics required to optimize omnichannel retail. CONTEXT recently surveyed members of the C-Suite and top executives from 30 of the top technology retailers in Europe. 91.3% reported that omnichannel is "Critical" or "Very Important" to the survival of their business.
What is significant for distributors is that traditional retailers are realizing that they don't have the infrastructure, resources and omnichannel capabilities to compete with the likes of Amazon. They also realize that omnichannel consumer expectations are rising in terms of demanding more choices in assortment and delivery options.
The top European retailers in the CONTEXT Omnichannel Survey reported the following as their top priorities for investment and developing strategic partnerships:
It is not startling that 75.9% of respondents identified the search for partners and resources related to systems as a priority. What is significant are the other priority areas where distributors can play key roles: logistics, distribution, local delivery, warehousing, inventory management, follow-up services and even analytics.
New distributor opportunities beyond traditional retail roles
In many ways, distributors' role was historically defined by warehousing products and shipping bulk quantities to retailers. While distributors are still the bridge between manufactures and retailer, omnichannel consumer behaviors are creating new opportunities for distributors. In a very real sense, omnichannel is requiring both retailers and distributors to think in terms of "mass distribution" customized for single products to individual consumers.
Retailers do not have the infrastructure, systems or resources to do it all. They need strategic partnership from distributors, who can offer solutions beyond just holding inventory or shipping pallets to stores. Omnichannel can be the perfect storm of distributor opportunities.
Omni-retailers are searching for partners in at least 5 key areas:
- Drop Shipments – More long tail SKUs online will require partnership for rapid fulfillment direct to consumers without dramatically increasing inventory.
- Rapid Replenishment for "Click and Collect" - All stores have limited back stock so they require rapid replenishment for volumes generated by online purchase and in store pickup. Real time inventory tracking is also a key click and collect requirement.
- Precision Delivery in Time Slots – It's not just about speed of delivery, but customers requiring specific delivery when they are home.
- Click and Collect at Lockers – Delivery to pick up lockers helps solve timing as well as convenience for commuters.
- Returns – Reverse Logistics – Increasingly consumers are purchasing online but returning to stores. Retailers need assistance with controls and reverse logistics.
More dialog and research will be required. But, in the words of Jeff Bezos at Amazon: "Tomorrow is Day One".
CONTEXT is attending DISTREE EMEA 2017 in Monaco February 21-24, 2017. For those attending, we invite you to participate in the dialog regarding omnichannel opportunities and how distributors can capitalize on them.
- Distributor Graphic: Stuart Miles, Freedigitalphotos.net