When the COVID-19 pandemic began a five-year acceleration of the e-commerce market, retailers had to review their omnichannel strategies to meet increasing demand. Other than the option of partnering up with logistics providers or using e-fulfilment technological platforms, also other solutions have been implemented to cover e-commerce logistics needs as highlighted by research done by Ti for the upcoming 2022 e-commerce logistics market report.
Stores as micro-fulfilment centres
With warehousing space reportedly running out and costs of logistics rents on the rise, it begs the question: is the only strategy “to buy or to die”? Apparently not, as demonstrated by some European and US examples.
In June 2020, Inditex announced that it was preparing for the post-COVID-19 world. The company announced it was planning to push the online side of its business as it expected 25.0% of its sales to be online by 2022 moving forward. Part of this roadmap included the “absorption” of up to 1,200 smaller stores, especially of brands other than Zara, and staff to be re-deployed to tasks such as dispatching online purchases. At the time, the group confirmed it would open 450 new shops and larger stores would be acting as distribution hubs for online sales.
More recently, Walmart also announced that it planned to expand its store-based fulfilment model to more locations after it saw the number of online orders fulfilled by stores increasing by 170.0% in 2021, reports Winsight Grocery Business. Walmart also mentioned increased pickup and delivery capacity by 20.0% in 2021.
The market/micro fulfilment centres are located within Walmart stores, but inventory for online orders is kept separate. This structure, according to the company, allows it to enhance its services for both online and in-store customers. With about 90.0% of the US population living within 10 miles of a Walmart and a total of 4,700 stores across the country, this solution creates an ideal network of micro-fulfilment stores, which Walmart said it plans to expand by an additional 35.0% in 2022.
Retailers becoming logistics providers
In January 2022, it was announced that Spanish fashion chain El Corte Inglés had commenced operations as a logistics provider under a subsidiary named El Corte Inglés Advanced Logistics. The company had been preparing for the move for some time, and in December 2021 it had divested its Tarragona assets to property developer Panattoni. According to sources, the aim was to focus on its logistics activity for the northeast of the Iberian Peninsula and the Balearic Islands. The plan was to use the logistics facilities it already owns in Barcelona’s Vallès Oriental, as part of the company’s first logistics ring.
As of January 2022, it is thought that the new subsidiary already employs around 5,000 people and has 1.2m sq m of floor space in 50 central and regional warehouses, with expectations that this will double in the medium term, and even triple, to provide comprehensive e-fulfilment services to third parties. El Corte Inglés Advanced Logistics is due to start operations soon in March 2022, but it is questionable as to whether it will ever reach revenues figures already generated by Amazon with its logistics and transport subsidiaries in Spain.
When looking at these examples, the use of stores as e-fulfilment centres is not a new practice, also implemented by Marks&Spencer in the UK and Target in the US for example. However, moving forward, it is also worth wondering if other retailers will follow El Corte Inglés’ path and manage e-fulfilment operations with the creation of their own logistics providers, possibly due to increased visibility on logistics operations and customer data insights.
Source: Transport Intelligence, March 2, 2022
Author: Caterina Ciccone
