The world of retail is undergoing unprecedented transformation driven by digitisation which has changed the face of logistics, with e-commerce providers falling into their own sector, and 3PL providers offering return logistics capabilities and tracking direct to the consumer, on top of traditional solutions. However, even though e-commerce continues to provide fair wind to logistics providers going forward, the way the logistics industry will evolve will depend on the way retailers react to digitisation. Despite all the hype surrounding e-commerce, the level of digitisation that the retail industry will adopt is still uncertain. There are several scenarios to consider in this regard.
The first scenario involves an even greater convergence between online and brick-and-mortar retail. The already blurred lines between traditional and online retail channels will soon be eradicated, with primarily store-based retailers further reducing the number of physical stores and shifting their investments online, whereas e-retailers will invest further in establishing physical presences. Such a development is already echoed in Amazon’s push into brick-and-mortar as the e-commerce landscape becomes more crowded and expensive. Similarly, Alibaba is also pushing further into the very sector that it helped to disrupt with the recent bid to purchase a department store and mall operator in China. This scenario also reflects the broader trend around “omni-channel” retailing. As omni-channel becomes more prevalent, the complexity of retail logistics is likely to increase. The response of logistics companies will likely be greater automatization of their processes driven by the demand of managing numerous retail channels. In such a complex environment, it is likely that the utilisation of 3PLs and 4PLs will increase.
The second, more extreme, scenario involves online retailers taking over physical stores. More innovative models will evolve to allow manufacturers and retailers to road-show their products or brands with event-driven pop-ups, resembling the current concept of Nespresso. The main threat for the logistics industry in this case comes from e-retailers who will be able to develop their own highly automated logistics solutions. Logistics companies will try to secure their standing by enhancing their IT systems to enable flexible flows of goods, resulting in the dominance of logistics integrators.
In a third scenario, the digitisation of retail reaches a saturation point. This scenario involves the evolution of flagship stores and experiential shopping experience for consumers, driven by the difficulty to present a compelling brand experience online. In a setting like this traditional logistics providers and 2PLs will be the key players in retail, with warehouse logistics seeing only moderate automation.
In summary, there are plenty of signs that retail is at an inflection point. Whether retail logistics will be able to remain competitive in the future, or whether new players position themselves between the end customer and sellers, is likely to be determined by the position retail takes in the face of digitisation. The most likely development is that the future of retail sits at the intersection of e-commerce and brick-and-mortar, which will be the best-case scenario for the logistics industry. It is likely associated with more complexity, as well as a greater demand for more and different distribution space and delivery options, compared to the extremes of pure online and offline retail.
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Source: Transport Intelligence, February 16, 2017
Author: Violeta Keckarovska
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)