Cliché or not, the world has changed beyond imagination in the past 12 months, and much of the retail industry has borne the brunt of the impact of the pandemic. Predictions made as recently as 2019 are now firmly outdated, as the uncertainty brought on by Brexit and Covid-19 has transformed the business landscape. For retailers, survival is predicated on keeping up with consumer expectations, particularly around home deliveries and returns. Supply chains have never been so important.
As of November 2020, online sales accounted for more than a third of all retail sales (36 per cent), up 67 per cent from the year before (21 per cent). As the population retreated to their homes and high streets and shopping centers alike were left empty, online consumer spending boomed, increasing by 50 per cent in just eight months. As retail businesses in the UK attempt to navigate the complexities of Brexit and thrive despite the near non-existent footfall, a resilient and efficient supply chain is vital in order for them to make seamless online business a priority, and serve the needs of their customers.
Customer experience-focused logistics
One major impact of the Covid-19 pandemic is that e-commerce trends that have been gradually developing in recent years have suddenly accelerated. As 2021 is being viewed as a year to recuperate some of the lost revenue from 2020, retailers that fail to adapt and update their supply chains to meet consumer demands could face fatal problems. As a result, this year will see retailers using storefronts as fulfilment hubs, personalizing and automating the online support experience and enhancing their in-store offerings with technology as part of the move towards a seamless omnichannel shopping experience.
New research commissioned by 7bridges, together with recently published research from the ONS, shows that shoppers who have a preference for online are higher spenders, spending nearly 169 per cent more than their high-street equivalents. This means that, for the foreseeable future, online is where retailers can generate their growth and profits, if they can also get a handle on the new costs that come with this key battleground.
The Amazon example
Amazon continues to dominate in the ecommerce space, setting the standard for online shopping experiences and enjoying record sales in the second half of 2020 as a result. Despite the challenges arising from pandemic-related border closures and even as its EU sales take a hit from post-Brexit charges on shipping to and from the continent, Amazon is thriving. But how can retailers follow its example?
Delivery and returns – quick, cheap and green?
With so many consumers moving online to shop, retailers need to provide the experience they expect. What this looks like in real terms is investing in smart technology so that the online experience delights in speed, cost and sustainability. This can include optimizing end-to-end logistics for an exceptional delivery and returns service, including multiple delivery options to suit all needs (standard, next-day, last-minute); keeping delivery rates in line with consumer expectations; and prioritizing eco-friendly and functional packaging over an eye-catching design more commonly deployed to compete for attention on a shop shelf. It may sound like a tall order, but technology really is making it possible.
Our research showed that environmentally friendly delivery and packaging options are not simply preferred, but that they actively influence purchasing decisions, particularly among Gen Z and millennial shoppers. Fifty-eight per cent of 25-34 year-olds actively select carbon-neutral delivery options, while 62 per cent say that their choice of retailer is affected by the availability of eco-friendly or minimized packaging. Retailers wanting to keep costs low is understandable, but it’s worth noting that 52 per cent of online customers say they would continue buying from the same company if they get their orders in premium packaging.
Adapt existing infrastructure
With shops across the country left empty, repurposing physical storefronts into virtual warehouses can help boost logistics operations, shortening the distance to the end consumer. This temporary ‘ship-from-store’ model is already being implemented successfully by brands such as Selfridges in London, as retailers look to mitigate the loss of consumers walking through their doors.
Retailers with existing stores can use them as a valuable asset in their online sales efforts, particularly in situations where footfall is drastically reduced, such as localized lockdowns. Integrating existing assets into the supply chain infrastructure not only helps fulfil online sales in the most efficient ways possible, but also offsets the costs of keeping stores. This, in turn, boosts the brand’s visibility and can impact total sales volumes, as shown in research from CACI, which found that brands experience an increase in online sales within the catchment of a bricks-and-mortar store.
Don’t wait for the unexpected
The key takeaway for retailers over the past year should be that waiting for the unexpected to happen is a bad strategy – and will lead to disaster. No matter what you have planned, any number of things can disrupt business-as-usual, from localized extreme weather events to national-level political or economic decision-making or even a global pandemic. In 2021, retailers must resolve to prioritize resilience and flexibility in their supply chains so they are less exposed to unforeseen delays or costs.
One example of this adaptability is implementing a multi-provider logistics strategy to help avoid absorbing damage from third-party difficulties. For example, in January, DPD’s road service was halted by problems with the manual paperwork processes and incomplete data. Any retailers unable to switch to an alternative shipping provider rapidly will have suffered as a result. The inflexibility of operating with a limited number of carriers leaves businesses vulnerable to both additional costs or surcharges as well as poor carrier performance.
Resilience is not a new requirement for retailers – the sector has evolved with the markets and societies, and has always had to adapt to unforeseen circumstances. The imperative for retail businesses is ensuring their operational models are robust enough to overcome current hurdles. Combining astute strategic planning and effective digital transformation tools will give many a leg up in the market.
Philip Ashton is co-founder and CEO of 7bridges. 7bridges is a smart logistics platform that uses AI technology to transform logistics for scalable, sustainable and profitable business growth. It was co-founded in 2016 by Philip Ashton and Matei Beremski, with the aim of transforming and democratizing logistics with smart technology.