What’s Next for Retail Logistics to Match Customer Expectations

Today, your customers are increasingly demanding instant gratification. The question is – can you deliver it?

As timescales for home delivery have shrunk from next-day to same-day, fast approaching next is the growing expectation of same-hour delivery – and with it comes huge logistical implications for retailers across the board.

Adding to the challenge is the fact that although consumers continue to want greater choice and more rapid dispatch, many also want reduced delivery costs.

Research from Summit earlier this year reveals 66% of consumers reporting choosing one retailer over another due to superior delivery options, with 50% stating that they are likely to abandon their shopping cart if free delivery isn’t offered. However, 50% also said that they would be willing to pay for a more convenient delivery option.

The picture that emerges is indeed complex. But as some of the world’s biggest and most influential retailers – with Amazon, of course, being the largest case in point – continue to break new ground, it’s time to ask: What’s next for retail and fulfilment logistics as customer expectations continue to grow?

You can find out more about balancing customer demands with profitability at eTail Fulfilment and Returns. Our agenda for this year includes Svante Lindgren, Head of eCommerce Logistics, Ahlens, on ‘Analysing the impact of different delivery options on profitability, conversion and sales: How to manage e-commerce fulfilment and deliveries to maximize profitability and growth’.

Warehousing

Evolving technology will completely transform the way ecommerce players organise their distribution networks and deliver goods to shoppers over the coming years. What’s more, as the one-hour delivery imperative continues to loom large, greater amounts of warehouse space will be needed if demand is going to be serviced at the level that’s required.

Today, as research from E-Commerce Europe reveals, only 8% of all European retail transactions take place online. However, this is forecast to increase to 25% by 2025, and if it does get anywhere near this figure, the potential for oncoming disruption is huge.

Providing choice, ensuring availability, and servicing the demand for low-cost one-hour delivery anytime and anywhere is shaping the arena upon which retailers will be competing over the coming decade. And as more choice is offered and more sales are generated, more space will be required to ensure fulfilment. Indeed, according to research from ProLogis, for each additional €1 billion spent online, 72,000 sq. m. of additional warehouse space is needed.

To cut costs, it’s likely that retailers will relocate their warehouses to cheaper locations – especially those involved with cross-border ecommerce, who may choose to place distribution centres closer to borders in order to keep costs as low as possible while catering for globalised shoppers.

To help you figure out what’s next for your business, our agenda for eTail Delivery and Returns includes Robert Redmile, General Manager, National Routing and Planning Centre, Dixons Carphone, speaking on ‘How to evaluate the impact same day delivery (SDD) will have on other parts of your business and whether the demand is high enough to remain profitable’.

Robots

As well as moving location, warehouses will also be growing taller, with an increased proliferation of robotics allowing stock to be stored, racked and retrieved with greater accuracy, efficiency, and from greater heights. The Industrial Federation of Robotics (IFR) reveals that, worldwide, 290,000 new industrial robots were installed in 2016, and expects continued growth averaging at least 13% per annum over the next two years, leading to a global total of roughly 2.6 million units in operation by the end of 2019.

Whilst it’s true that the majority (70%) of robots are currently deployed in the manufacturing sector, warehouse proliferation is set to rise. Amazon, of course, is leading the way. Since it purchased Kiva Systems in 2012, the ecommerce giant has been overhauling its fulfilment centres around the globe with robots that can pick, pack, store and retrieve product orders at almost break-neck speeds. Reports suggest that Amazon now has as many as 45,000 of these robots at work across 20 of its fulfilment centres worldwide.

Other retailers, too, are unveiling their own robotic fulfilment centres, such as Hudson’s Bay’s OPEX Perfect Pick system, which became a first-of-its-kind in Canada in November last year. Multinational robotics company GreyOrange , as another example, expanded into the European Market in March, opening regional headquarters in Hanover, Germany where it is better positioned to start deploying its advanced robotics and automation systems at retailers’ distribution and fulfilment centres across the continent.

According to a new report from Tractica – “Warehousing and Logistics Robots” – the number of robots in warehouses will increase fifteenfold over the next four years, with robot unit shipments increasing from 40,000 per annum in 2016 to 620,000 by 2021.

Last Mile

Another area where Amazon is breaking new ground is in its experimentation with drone technology. Forget one-hour deliveries, the goal of Amazon’s project – known as Prime Air – is to get packages to customers in under 30 minutes.

Currently still in its testing phase, the investment has nonetheless been made and will eventually become a reality. Indeed, Amazon states that 86% of their deliveries weigh less than 5lb, making widespread drone delivery absolutely possible for the retailer.

In the meantime, Amazon Flex enables anyone with a vehicle and a smartphone to become an Amazon delivery driver in a move that both cuts last-mile shipping costs and speeds up delivery time. Similarly, UberRUSH allows retailers to tap into the continuously growing network of Uber drivers to provide on-demand express delivery services for their customers at low-cost.

What’s more, as the proliferation of electric vehicles and the evolution of battery technology continues, the current restrictions on night-time deliveries due to noise will be lifted, enabling round-the-clock deliveries.

Also on the horizon are autonomous delivery vehicles, though this becomes complicated, particularly in urban areas amongst the rush of cars, bicycles and children playing on the streets. Nonetheless, solutions are emerging. Dispatch has developed a last-mile robot – capable of carrying 100lb – equipped with sensors and AI technology to safely navigate the busy streets. Amazon, too, has assembled a team to focus on driverless-vehicle technology to deliver packages to customers during the last leg of the shipping process, and is also interested in autonomous trucking. And of course, the likes of Google, Uber, Tesla and many others are heavily invested in making driverless-vehicles a reality.

All such solutions, however, are still in development and will require the relevant authorities to legislate and regulate the market before they come into force. Research from Morgan Stanley suggests that all such regulatory and technological hurdles will have been overcome by 2030.

If you want to find out more, this year’s eTail Delivery and Returns is hosting a talk from Francis Nicholas, Group Digital Director, Nomad Food, all about ‘How to find the balance between customer needs & logistics cost when setting your last mile delivery strategy’.

Download the agenda to see what other great speakers, activities and sessions planned for this year.