In today’s changing retail environment, it’s all about providing the best customer service which includes offering options for the customer. Where does the customer want to shop – at a physical retail store? Online? Mobile? Where does the customer want to have their goods delivered – at Home? Pick up at the retail store? Pick up at an alternative location?
These options have become necessary for retailers to offer as Amazon, eBay and other online retailers grab more of the customer’s retail spend. However, these options have resulted in a profound change in contract logistics. No longer is it as simple as inventory arriving to a distribution center and then being delivered to stores. How the inventory arrives to the distribution center has changed as has where the inventory is destined from the distribution center. And don’t forget the returns. How these are handled is also undergoing a big change. Linking all of this together are the IT systems which are also undergoing many changes.
According to Ti’s latest report, Global Contract Logistics 2014, the US, the world’s largest contract logistics market, grew at 1.5% for 2013. An interesting market, dominated by the revived automotive manufacturing industry, the rising demand in oil and gas along with the major changes that are underway within the retail industry, the contract logistics needs for these varied industries have resulted in a much more fragmented market compared to that found in Europe. For example, DHL Supply Chain, the largest provider, has only an estimated 7.0% market share for the North American market. In fact, the top 10 contract logistics providers make up only 26% of the North American market.
Indeed, perhaps this fragmentation can be shown in how Macy’s, one of the US’ largest retailers, handles its logistics needs. For example, the retailer is working towards allowing customers to choose whether to pick up internet orders in the store of their choice or have them delivered to their home. Also, with 90% of returns made to stores, some of Macy’s smaller stores which may have closed previously due to weak sales are now gaining sales as Internet shoppers return merchandise to these stores and then shop while in the store. Finally, international customers are on the rise. Serviced by Borderfree Enterprise, customers shop on the Macy’s Internet site anywhere in the world. The website looks like a Macy site but the fulfilment is handled by Borderfree, thus assuring compliance with local laws and customs.
Estimated to grow at 6.4% through 2017, the North American contract logistics market will continue to benefit from various industries such as oil and gas and automotive. However, perhaps one of the biggest opportunities will be found in the retail industry as it undergoes profound changes thanks to e-commerce.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)