Consumers’ rapid adoption of digital technologies has transformed how they complete purchases and in the process how they want their products delivered. Empowered to locate and buy what they want, when they want it, consumers are now expecting to access the product rapidly and conveniently. Retailers that respond by offering flexible and more immediate pickup and delivery services are likely to win consumers’ loyalty.

With orders increasingly being delivered to unique locations specified by the consumer, the delivery experience is becoming an important factor in managing consumer conversion and retention. Developing faster and more flexible fulfilment solutions has already become one of the key differentiators for retailers. According to StoreFrontBacktalk, Amazon’s same day delivery has driven a 25% increase in conversion. The challenge is to flex and optimise the supply chain to manage different delivery requirements based on the type of product bought, where it is, and when and how the consumer wants it delivered. For example, they may find it convenient to pick up small deliveries, such as DVDs or clothing items, from their corner shop or get it delivered to their office. For larger orders, such as a sofa, they might prefer to get the product delivered at home over the weekend, with a specific timeslot.

From a supply chain perspective, these additional delivery options have led to retailers extending their delivery and fulfilment propositions while trying to manage the risk of reversing previous economies of scale. Retailers are shortening delivery lead times, introducing unlimited delivery service subscriptions, narrowing timeslots and extending deliveries late into the evening. They are also offering new pickup services, such as collecting stock from third party locations, from a store or a locker via click and collect, or having the goods delivered to multiple addresses. To continue to move towards more convenient fulfilment, retailers will need to develop innovative services such as:

  • Collaborative fulfilment and delivery: Google has launched ‘shopping express’ which allows a consumer to buy from multiple retailers and have all the items delivered together.
  • 3D printing: consumers printing products in their homes negating the need for retailers to have a traditional supply chain.
  • Drones providing a new transportation mode: companies are looking to create a transportation network using unmanned aerial vehicles.

For traditional bricks and mortar retailers, implementing these new propositions puts pressure on supply chains that were designed for efficiently replenishing stores and are now having to cater for both bulk and ‘one-item’ delivery. For non-traditional retailers, the challenge is to deliver orders to the right place without the ability to offer a click and collect service.

The wrong delivery is also very inefficient for the retailer as it will require an expensive return process or lead to lost stock. As retailers increase both the range of stock on offer and their unique location delivery services, fulfilment is becoming a challenging and costly process to manage. According to IMRG, the cost of failed online delivery in 2012 was estimated at £850 million. Meanwhile, according to the Consumer group Which?, 60% of online shoppers had problems with delivery in 2012. This is partly due to retailers having to rely on multiple suppliers and carriers to deliver orders, impacting their ability to provide a consistent service across all delivery options.

Retailers have been investing in more flexible and immediate delivery capabilities, but this is putting increasing demand on their supply chain. Retailers need to ensure they protect their margins and control costs. In managing this process, they need to review the current state of their supply chain around:

  • Network optimisation: as ‘click-and-collect’ becomes an integral part of the multichannel experience, when considering their store portfolio, retailers need to decide which stores can be used as a collection point store. Key considerations include available space, the gains from uplift in traffic and in-store upsells, faster fulfilment time using store stock and the costs of having a physical presence on the high street.
  • Stock visibility: retailers need to access, in real time and in a single view, their inventory across all stores, distribution and fulfilment centres to allow consumers to locate a product depending on its availability by location. It also allows retailers to gain efficiencies in fulfilling orders ultimately driving consumer loyalty, revenues, referrals, and profitability.
  • Flexible supply chain: as consumers pursue propositions that fit their daily routine, such as late evening timeslots or late evening orders with next day delivery, the demand on the supply chain has become inconsistent. Retailers are faced with the decision on whether to build a fulfilment capability based on peak volumes or find ways to smooth fulfilment demand.

Some of the solutions retailers need to consider to build the right supply chain architecture include:

  • Developing the network of the future: a physical network that enables rapid and efficient allocation of stock where there is greatest demand;
  • A single view of stock: an integrated system platform, which allows accurate visibility of all stock across the supply chain;
  • Agile buying and merchandising: collaboration and partnerships across the end-to-end supply chain, both internally and externally, to ensure consistency and leverage scale; and
  • Understanding cost to serve: measuring the costs at each stage of the supply chain and using this to drive efficiencies and a cost-effective supply chain.

Deloitte will discuss these solutions in more details in subsequent articles to be featured exclusively in the supply chain & logistics section of Essential Retail.

In such a fast changing environment, building a flexible delivery foundation that is convenient and relevant to the consumer, is now the Holy Grail for retailers who aim to have a seamless multichannel offering. 

www.deloitte.com/UK