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March 18, 2022

Delivery Innovations: Industry trends

Listed below are the key industry trends impacting the delivery innovation in retail theme, as identified by GlobalData.

Despite the many advantages that online retailers have, the rise of the online channel has created a rapidly growing issue—last-mile delivery. Previously, consumers carried the responsibility of transporting any purchased products from store to home but increasingly this final stage is falling onto the shoulders of retailers.

Ecommerce

Across the board, the ecommerce channel has emerged as a winner during the Covid-19 pandemic, as it was the only channel that generated substantial revenue for many retailers. Convenience and compulsion have been the defining factors of the ecommerce boom; people have found it easy to shop online and get things delivered during lockdowns, and those who earlier preferred to shop at physical stores were forced to adopt new digital ways. Customers have become familiar with this method of purchase, and it will have a lasting impact on retailers’ business strategies. Retailers should consider enhancing their online capabilities through marketplaces or direct-to-consumer selling.

Retailers have enlisted delivery companies such as Deliveroo, Instacart, and Rappi to help with last-mile delivery and offer fast fulfilment to shoppers. In the long term, retailers need to set up and strengthen their delivery, click and collect, buy-online-pickup-in-store (BOPIS), and curb side pickup systems to support growth in online business.

Quick commerce

Quick commerce (q-commerce) is all about the fast delivery of small orders, unlike traditional ecommerce, which has average delivery times of three to five business days and accommodates larger orders. Q-commerce complements, rather than replaces, weekly/monthly shopping trips, as it allows shoppers to quickly get hold of last-minute items or items they may have forgotten. As competition in online delivery services increases, companies are striving to decrease delivery times to stand out, by employing neighbourhood fulfilment centres, drones, and other autonomous vehicles. For example, JOKR, an app-based grocery delivery service in the US, launched a 15-minute grocery delivery service in New York City.

The micro fulfilment hubs, also known as dark stores, are not open to in-store shoppers but have a storage capacity of over 2,000 to 3,000 stock keeping units (SKUs) and are utilised to deliver groceries to any location within an eight-minute e-bike ride. Other retailers that have introduced their own rapid delivery options to compete include Tesco (Tesco Whoosh) and Ocado (Ocado Zoom).

Automation of supply chains

Retailers are incorporating more scalable and adaptable solutions in supply chain management to stay relevant in a highly dynamic and rapidly changing market. Increasing labour shortages, growing real estate rental prices, and fulfilment demands are the major factors driving companies to deploy single automation processes that manage supply chain areas. These areas include warehouse management, instore inventory, shelf management, logistics, product lifecycle, and demand analysis.

Automation plays a crucial role as it helps retailers lower supply chain costs and optimise operational processes to improve efficiency. It helps to save costs through effective utilisation of storage capacities, as well as by analysing customer demand patterns, improving supplier relationships, and moving supplies faster. Synchronised planning of supply chain management enables growth in strategic markets, speeds up the order-to-cash process, and offers opportunities for business expansion.

As consumers are increasingly demanding quick delivery and convenient shopping options, there is a need for retailers to differentiate themselves by moving towards demand-driven supply chains and focusing on innovative approaches to sourcing, replenishment, distribution, and logistics. Although the initial cost of advanced technologies is extremely high and can cause short-term disruption, the potential long-term profitability will encourage retailers to adopt the systems.

Covid-19 impact on supply chains

The Covid-19 pandemic and resulting lockdown restrictions forced retailers to shut down operations, which adversely obstructed manufacturing, exports, and supply chain operations globally. This has directly impacted leading international brands such as Inditex, Hennes and Mauritz, Gap, and others that source raw materials from across the world. The pandemic not only impacted large players but also negatively affected small and independent retailers.

Retailers focused on innovation and flexible approaches to streamline supply chain and logistics operations during the pandemic and accelerate recovery. Emerging tech-driven disruptions such as the use of contactless technology for checkout, improving supply chain sustainability, and offering a superior delivery experience have been key areas of focus for retailers.

Consumers shifted to online retail platforms as stores were forced to temporarily close during the pandemic, which stressed the logistics operations of ecommerce players. To meet this growing online demand, ecommerce players invested in expanding fulfilment infrastructure and formed partnerships with other logistics experts. For example, Flipkart strengthened its last-mile reach with over 3,000 delivery hubs across India to meet the festive season demand in 2020. Similarly, in April 2021, Flipkart partnered with Adani Group’s Adani Logistics Limited to strengthen its supply chain infrastructure and further boost its capability to serve its swiftly increasing customer base.

This is an edited extract from the Delivery Innovation in Retail – Thematic Research report produced by GlobalData Thematic Research.