E-commerce demand has increased at a rapid rate amid the COVID-19 pandemic. U.S. and Canadian online orders, for example, skyrocketed 129 percent year-over-year as of April 21, according to Emarsys and GoodData. In the wake of this sudden spike in shopping, retailers’ fulfillment systems are being tested to their maximum capabilities.
As many non-essential retailers still have stores closed, retailers now must rethink how they prioritize their fulfillment capabilities, and what that means for how their e-commerce operations perform once stay-at-home restrictions are lifted.
Many retailers have responded in kind by turning a portion of their closed stores into fulfillment centers, either by having shoppers pick up ordered products on the curbside or by shipping products from the store to the shopper’s home. Jewelry retailer Kendra Scott went as far as to convert all 108 retail stores into mini fulfillment centers in partnership with supply chain solutions company Manhattan Associates, while Bed Bath & Beyond turned 25 percent of its stores into regional fulfillment centers, giving both retailers the ability to shorten delivery time windows and keep select employees at work.
But the biggest disruptions within fulfillment are taking place on the technology side, where companies are sprouting up with new solutions or features designed to take the heat off retailers and help them adapt to this new environment, in which most of them have only one channel to sell through.
“You’re seeing that without distributed supply chain, without the infrastructure and the system ready to meet consumer demand for online orders, a lot of companies are really being left behind,” said Scott Gravelle, CEO and chief technology officer of Attabotics, a 3D robotics supply chain system. “That is a massive shakeup, because it’s an acceleration of everything [that’s] happening.”
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Gravelle noted that retailers are seeking fulfillment solutions that first prioritize digital supply chain transparency, especially as shoppers tend to overbuy when a product is perceived to be scarce, such as in March when sales of personal protective equipment and toilet paper took off. While concerns of the manufacturing of N95 masks were valid because they were largely sourced overseas, the overabundance of toilet paper, often sourced in North America, shows that there is an uneven and uncertain sense of what needs to be replenished in the supply chain at any given time.
Attabotics has partnered with Microsoft “to create some more transparency in the supply chain of accurate, near-real-time information,” Gravelle said. In leveraging its 3D robotic goods-to-person storage alongside the Azure platform, the technology is designed to condense rows and aisles of warehouse shelves into a single, vertical storage structure, enabling robotic shuttles to move horizontally and vertically, retrieving goods and ultimately cutting down pick, pack and ship process times.
Microfulfillment
As retailers aim to cut down fulfillment processes both during the COVID-19 pandemic and going forward, it may be worth taking a route grocers have experimented with in recent years―microfulfillment―especially if they have any intention on fulfilling orders on demand. Microfulfillment has already been an accelerating trend that pivots the role of a portion of a retail store or dark store into a mini-distribution center as a way to enable faster, flexible delivery times on top of decreasing online order costs.
“What microfulfillment does is it allows us to get into very small spaces,” said Anne Marie Stephen, sales director, U.S. retail and commerce at Fabric, told Sourcing Journal. “The reason that matters is that you’ve got to get closer to those customers. A traditional distribution center cannot support on-demand delivery: they weren’t designed for that. And they certainly cannot support the consumer demand which is now being even further driven by COVID for the same-day/next-day proposition.”
Fabric, an AI-powered robotics company, can create automated micro-fulfillment centers with as little as 5,000 square feet of space designed to deliver goods to local communities within the hour. With a growing consumer demand for local goods and a continued expectation of quicker delivery times, more fashion and apparel retailers have plenty of opportunities to convert spaces in stores they are not presently using, or may even think about closing for good as the pandemic subsides.
Stephen referred to the technology as designed with a “flexible topology” that enables retailers to scale the technology as the business grows based on inventory level, desired reach and operating and capital expenditure requirements.
“As we’ve seen the landscape of retail changing before the store closures, retailers have the ability to consider how they would repurpose the store and make them useful and productive in a different way,” Stephen said. “Micro-fulfillment could be a great answer for that.”
As retailers have sought additional fulfillment operations within their store operations as they remain closed, ship-from-store becomes a reasonable, and at this stage, essentially necessary, option to offload inventory without instilling markdowns.
Store-based fulfillment and same-day delivery
Dsco, a distributed inventory platform that delivers services such as drop shipping, recently launched a ship-from-store solution designed to enable retailers whose stores have shut down to quickly start moving inventory again to avoid the cash liquidity challenges and bankruptcy issues that have plagued many merchants.
“The speed with which we can move different than monolithic IT systems or internally created systems is what’s really helped a lot of companies get up and running quickly shipping from store now,” Dsco CEO Vance Checketts told Sourcing Journal. “If you have a physical store, you have piles of inventory. If you don’t have a ship-from-store solution, you’re just watching that inventory rot.”
Dsco had always thought of ship-from-store as an opportunity for the future, but once the pandemic hit the U.S. the company finally invested and began implementing and testing order-routing logic in its platform architecture so that it could better determine route optimization across all its supply sources.
Another AI-based logistics network, Ohi, is taking the steps necessary to get same-day delivery on the map for direct-to-consumer brands via its smart warehousing platform. The company repurposes unused space within urban areas to reach as many consumers as possible, and offers growth-stage brands the opportunity to establish fulfillment centers without long-term leases.
When Amazon started to get overloaded with orders after the pandemic reached the U.S., causing shipments of select goods to be delayed, founder and CEO Ben Jones saw this as an opportunity for Ohi to get out in front of more consumer brands that suddenly realized how reliant they were on the e-commerce giant to sell their product efficiently.
“All of them are looking to grow their consumer business through their own website, but they know that then they’re basically competing against the products sold on Amazon,” Jones told Sourcing Journal. “So if Amazon is doing same-day delivery or two-hour delivery, they know they need to offer the same on their web site to be competitive.”
Jones cited proprietary data indicating that shopper basket sizes on average increase 34 percent for purchases that offer same-day delivery, making it a more efficient revenue driver than many companies realize.
If there’s one thing the pandemic has created no shortage of, it is significant demand for these technologies. Jones said that Ohi has fulfilled 10 times more volume in April than the company did in February, with the huge uptick in demand spurring Jones to consider the option of creating a waitlist for brands.
Gravelle reported a significant uptick for Attabotics as well, with orders increasing by three to four times ahead of pre-pandemic totals. And at Fabric, Stephen highlighted that one of the company’s clients, Israeli drugstore Superpharm, had to fulfill 1,000 online orders per day at the peak of the COVID-19 outbreak, doubling the typical 500 online orders per day.
Why customer communication matters
The key to the success of a lot of these platforms may not come down to the technology involved, but the ability to communicate with the consumer about the purchase, especially given the current uncertainty in many facets of day-to-day life.
A recent Convey survey revealed that 60 percent of shoppers say they are understanding when some items they want are out of stock, with nearly all (96 percent) willing to give retailers leeway during the pandemic. But as many as 75 percent of these shoppers want to know an estimated delivery date in their shopping cart before they buy and 70 percent said they will be less likely to shop revisit a retailer’s site if they aren’t informed in advance of potential delays. Simply put, retailers cannot afford to leave their shoppers in the dark, regardless of delays that may occur during the process.
Integration issues
However, if these technologies do gain more traction as shoppers get used to the fulfillment changes, especially if quicker deliveries do become more of the norm, shoppers may not be as keen on longer delivery times. With that in mind, retailers must continue to prioritize their investments in fulfillment, especially if they plan on competing with the Amazons of the world.
“It will seem completely bizarre in a year or 18 months’ time,” Jones said. “We’ll look back and say, ‘Why did we ever put up with waiting three days for something to be delivered. How did I think three days was an exceptional time period?’”
“I think we are very quickly moving toward that world of instant commerce where you’ll be able to buy anything you like at any time anywhere, particularly in the U.S., and be able to get it in a matter of hours,” he added. “That’s the kind of vision fulfillment companies are working toward and I think the COVID situation has accelerated that move, not necessarily by the end of 2020, but definitely by the end of 2021, that will be the new normal.”
Adapting to this new normal, or even getting through the current state of affairs, naturally comes with its challenges. Given that retailers already are losing money if they have a brick-and-mortar presence, justifying extra spending on new fulfillment options is yet another short-term financial hit on paper even if the supply chain disruptions are alleviated.
There’s also the integration problem, as some retailers still haven’t implemented a modern e-commerce platform that seamlessly plugs in with a newer fulfillment platform, prompting them to ponder a complete (and long overdue) overhaul.
“Some retailers we’ve spoken to have said, ‘This will take four or five months to do the tech integration,'” Jones said. “From an operational standpoint, every retailer has slightly different needs. One thing retailers constantly work on with us is making sure they can maintain the quality of their process while simplifying it enough to enable very high fulfillment.”
Gravelle pointed out that even the most “traditional” retailers don’t have their head in the sand when it comes to where headwinds originate from, and that if anything, they are just being risk averse.
“I think there’s been a paralysis in the industry that we’ve seen for a while,” Gravelle said. “Everyone knows they need a new solution, but it comes down to that idea that no CTO ever got fired for buying IBM.
“The traditional warehousing automation companies haven’t delivered a lot of innovation. The innovation is coming from smaller companies, so there’s a de-risking that needs to happen,” he continued. “There’s a risk aversion to be the company that does the de-risking, and I think now that you’ll find that more people are ready to make bolder moves because sitting doing nothing and waiting for somebody else doesn’t solve a problem.
“In Sales 101, fear is the biggest motivator.”