Retail’s race to convenience: making it scalable and sustainable

October 30, 2019

Most industries are in a race to improve the customer experience and increase convenience. With the world at our fingertips, we have access to more information than ever before. And with that, retailers and companies have been forced to innovate, bringing their businesses online and creating a digital consumer experience. E-commerce has played a great part in this digital transformation and has been hugely profitable for companies. According to a report by McKinsey, same-day delivery could unlock a more than USD 200 billion opportunity for retailers in Europe and North America over the next decade. However, it comes with its own set of challenges.

The difficulties of the last mile

Technology giants like Amazon and Alibaba have set the bar high in terms of services offered and customer experience, making everyone else scramble to meet the same standards. Of course, the biggest difficulty for all e-commerce businesses is the last mile: ensuring people get their goods when promised without bleeding money in doing so. 

In the race to convenience, companies are trying many different tactics to ensure they remain competitive and retain customers. One of those is the ability to ship faster, which can be achieved through decentralized shipping locations, i.e. delivering items from stores as opposed to from warehouses. For companies that don’t have the manpower or budget Amazon does, this enables them to stay more competitive and deliver to customers quicker. 

Alternative shipping solutions for greater convenience

There are two main alternatives to shipping from centralized warehouses: click-and-collect (also known as BOPIS: buy online, pick-up in store), and delivering from stores i.e. decentralized shipping.

Click-and-collect has several benefits, including the opportunity to upsell. The International Council of Shopping Centres found that 61% of shoppers who bought items online and picked up in-store, made an additional purchase. It also offers consumers greater convenience: they can pick up their item when it suits them (as opposed to the hassle of home delivery), save costs on delivery, and potentially even return it if they decide it’s not right for them… Meanwhile, retailers are saving on shipping costs, all while creating new opportunities to bring customers back in store: connecting online and offline. 

Decentralized shipping also has its advantages and has become an increasing trend, though not yet embraced by many companies. It helps them tackle the problem of “next day delivery” that can’t be managed from centralized locations without inferring large costs: customers can still receive their items quickly when they are shipped from the store closest to them. It also means stores can make better use of their inventory without having to discount stock they’re not using, or by shipping items purchased online that are “out of season” and not displayed on the floor. 

But decentralized shipping isn’t as simple as it might seem. Although this is changing, most stores aren’t set up to act as distribution centers. This means stocking needs to be rethought and prepared to accommodate more than floor displays. In addition, inventory needs to be tightly managed so that items are available both in store and online, without compromising one for the other. 

And are these options really scalable, and what’s more, sustainable? Although the priority is customer satisfaction, retailers still have a responsibility towards driving a sustainable business. And given the challenge of the last-mile, you also want to minimize your costs.

Scalable and sustainable last mile?

What is the most scalable and sustainable way for e-commerce businesses to operate, while still delivering on convenience? It’s increasingly clear that retailers have to use a mix of different strategies, both for customer satisfaction and their own bottom line. In order to do so, they will have to ship from centralized and decentralized locations, offer click-and-collect, and continue to optimize logistics for delivery. If they don’t make use of the different options available to them, it will be much harder to remain competitive and to scale. 

It’s clear that decentralized shipping supports scaling as there is no upfront investment needed in large warehouses, as well as recruiting and training the staff to operate them. Using already available resources is smart.  At the same time, with increased pressure on the environment and calls for change, companies should start thinking about the environmental impact of e-commerce (if they haven’t already) and how they can help minimize it. 

Shipping options play a large role here, with decentralized shipping offering a more sustainable solution. By shipping from stores that are close to customers, there is no longer the need to fly objects from a distant warehouse or transport them across the country. Particularly in urban areas, if coupled with green delivery options such as bicycles, the carbon emissions involved in the purchase of the item can be dramatically reduced.  

Despite the ever-changing demands placed on brands, decentralized shipping offers a sustainable and scalable solution to companies that are trying to optimize their e-commerce business. Just remember, if you opt for decentralized shipping then your in-store stock and inventory will have to be really closely managed and coordinated with your e-commerce channels!

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