Outlook on global urban logistics and retail store distribution features driven by e-commerce

The growth of urban logistics and retail store distribution is a trend that can be seen worldwide and has taken hold, especially since early 2020.

When looking at Europe, within Germany, FIEGE has been providing logistics services to Shopdaheim. The cooperation, launched in March 2020 as a response to the COVID pandemic, which has since grown to include retail stores from over 25,000 addresses within Germany. The strategy FIEGE uses with Shopdaheim to allow for fast regional delivery involves picking up the merchandise on the day it was ordered by using existing and local structures and then using a network of partners composed of alternative mail and courier service providers that are already on the road and can tie deliveries to collections for consumers.

Looking at a different geography, within China, JD.com has partnered with Dada since 2020 to create the Dada Now platform which can provide one-hour delivery capabilities within Chinese cities. Dada Now combines the JD.com omnichannel service which integrates offline stores with JD.com, and through partnering with Dada Now the service gained over 100,000 stores that will be represented on the platform. The service is available in 242 Chinese cities with over 3m products offered, also enabling one-hour pharmaceutical deliveries from around 13,000 offline drug stores in 157 cities across China. Whilst the service was originally intended for chain stores only, September 2021 saw Dada Now and JD.com accepting merchant applications, with more than 100 merchants within China currently accepted.

In the US, Walmart has also created a service that offers same-day retail delivery through its service Walmart GoLocal. First launched in August 2021, Walmart launched GoLocal to fulfil more than just grocery products, not to be limited by specific verticals. For example, in October 2021 it partnered with Home Depot to provide a white-label delivery service that can offer delivery in as little as 15 minutes, with Walmart suggesting next-day delivery is more suited to warehouse delivery solutions. In December 2021, GoLocal then partnered with Chico’s, a US-based fashion chain store, showing GoLocal is suited to multiple vertical sectors. Unlike Shopdaheim and Dada Now, GoLocal doesn’t have its own storefront, instead, partner stores use its own digital platform and notifies GoLocal when orders are received and the timeframe in which products are requested to be delivered.

Urban fulfilment globally is not only limited to digital platforms which aggregate local retailers and merchants like Shopdaheim and Dada Now, retail chain stores can also be seen create in-house urban delivery capabilities.

Within the UK for example, supermarket chains Tesco and Co-op have grown their local e-commerce operations. Co-op in the second half of 2021 began investing largely in its e-commerce capabilities, such as making e-commerce trade available in 1,600 of its stores, in more than 450 locations, and accessible to over 55.0% of the UK population. It has also doubled its “ultra-fast” grocery delivery services to 2,000 of its stores, claiming to cover two-thirds of the UK population, through the creation of its own micro-distribution hubs.

Similarly, Tesco announced in 2020 that it had made plans to create 25 urban fulfilment centres to support its e-commerce retail offerings by using excess space within its existing stores to fulfil parts of its e-commerce retail orders. These urban fulfilment centres will feature automated picking to speed up the fulfilment process. Tesco has confirmed three of these urban fulfilment centres within its existing stores, found in its Horwich Extra store in Bolton, its Valley Road store in Bradford, and one in West Bromwich which was the first to open. Following the creation of its urban fulfilment centres, Tesco plans to launch its service Tesco Woosh from at least 600 stores by the end of 2023, a service that currently partners with courier company Stuart to make deliveries within 60 minutes by bike, moped or car. Tesco CEO Ken Murphy believes that the service will complement Tesco urban fulfilment centres as “you can capture an order and process it through an urban fulfilment centre in seven minutes”.

Tesco’s choice to automate its urban fulfilment centres is part of a trend that is gaining hold. According to Interactive Analysis research, nearly 7,300 automated micro-fulfilment centres (MFCs) will be created by the end of 2030, while only 86 were available at the end of 2021. The company believes that the growth in the automated MFC market will mainly come from the large incumbent grocery retailers.

Ocado has also been seen to begin investing more in MFCs, such as the MFC in Bristol which opened in February 2021 at a size of 13,935 sq m. This is part of the recent Ocado belief that autonomous warehouse picking systems will soon work in “very small warehouses”.  MFCs like Bristol enable partners to extend automated capacity to wider geographies, and to serve denser areas with shorter lead times. Following the opening of the Bristol MFC, Ocado plans for another MFC in Bicester in H1 2022, as well as partnering with Kroger in the US to open an MFC in Romulus, Michigan at a similar time as the one in Bicester.

In-house retail distribution also isn’t limited to grocery delivery. Since 2020, Apple has been using its own retail store network within the US and Canada to provide its customers with faster delivery, through over 300 of its stores located within those countries. This service is used for customers who are local to the stores and far from warehouses, replacing the method of shipping either directly from China or from its own US warehouses.

As seen from this overview, most of these solutions have been implemented in 2020, when the start of the COVID-19 pandemic highlighted the limitations of not having an omnichannel strategy. Felix Koch, Strategic Project Manager City Logistics at FIEGE believes that urban centres and retailers need to update their fulfilment strategies to meet new demand from consumers, as “regional businesses in particular often lack omnichannel strategies and professionally organised logistics, which puts them at a disadvantage over the major online players.” With Koch arguing consumers want to buy locally, Koch believes efficient urban delivery and digital presence are what currently hold back local merchants and retailers from its local market. However, the above strategies implemented by retailers in different vertical sectors show how the market is moving in the right direction.

Source: Transport Intelligence, April 14, 2022

Author: Michael Sinclair