The folks at Lincoln International recently published an interesting article about retail disruption since COVID-19. The whole piece is well worth a read. But we’d like to share a few of its key takeaways here – the primary one being the need to ensure your fulfillment and logistics infrastructure is adequate to support sustained growth in eCommerce sales.
Online retailers have a unique opportunity in the coming months and years to step on the gas and grow at unprecedented levels. But if your fulfillment engine is not powerful enough to support this push, the opportunity could be lost.
Takeaway #1: The pandemic has been extremely good for eCommerce sales and credibility.
According to the article, the many guidelines that were put in place to combat the pandemic have changed the course of online sales in a significant way.
“eCommerce went from being the disruptor shopping channel to, for many product categories, the only available option,” the authors said, pointing out that consumers who were already using eCommerce to some degree found themselves relying on it for considerably larger percentages of their purchases. Consumers who had previously been leery of it were compelled to put their concerns aside in order to get the items they needed.
Takeaway #2: The pandemic-fueled growth that eCommerce has seen was on track to happen anyway. But it’s happened considerably faster.
The article acknowledges that eCommerce was already well-positioned for growth, even before the COVID-19 crisis.
“eCommerce has proven to be a resilient sales channel, often growing despite declines in broader retail sales and even through periods of economic stress,” they stated, noting that eCommerce’s piece of the sales pie nearly doubled between 2014 and 2019.
However, those gains pale in comparison to the meteoric sales increases that many online sellers have experienced since the lockdown – and the massive hit that brick-and-mortar sales have taken during the same period, with many well-known store chains like JCPenney, Pier 1 and J. Crew filing for bankruptcy protection.
The upshot is that “massive shifts in consumer purchasing behavior that would have occurred over many years have now taken place in weeks.”
This has put a strain on the fulfillment and logistics infrastructure of many online sellers. For instance, some have already recognized the risk of having just one fulfillment center for national distribution.
Takeaway #3: This is likely to be the new normal.
The Lincoln International article suggests that “once consumers have been ‘retrained’ [to use a different sales channel], there is tremendous purchasing behavior momentum.” Online sales channels are likely to retain much of the new business they’ve attracted.
Throughout the COVID-19 crisis, eCommerce has proven to be anti-fragile – durable enough to stand up to serious supply chain challenges in a way that brick-and-mortar channels clearly aren’t. And consumers aren’t likely to forget that.
“The convenience of eCommerce has never been questioned, but now we must recognize its criticality in a time of crisis,” the article’s authors explained, observing that, “the business model and infrastructure are exceptionally well situated to handle market and environmental disruptions.”
Because of these things, these experts predict that, “while the current crisis is temporary, the effects on consumer shopping habits will be long-lasting.”
Takeaway #4: It’s time to start shoring up your fulfillment and logistics infrastructure with this new reality in mind.
Now we know what you’re thinking: eCommerce was the wave of the future already and you’ve been pretty successful at it so far. So what’s the big deal?
For starters, you’re going to need to dust off that long-term fulfillment and distribution strategy sooner than you expected to. Among other things you’ll want to ask yourself:
- Are your current eCommerce fulfillment operations well-positioned to handle a sustained increase in sales rather than a temporary spike?
- Does your existing DC network have adequate fulfillment space, automation and processes – can your fulfillment solution scale?
- Do your current distribution operations place enough emphasis on fulfillment and customer service, bearing in mind that eCommerce customers are a more demanding lot – and getting more demanding every year?
- Is your current approach to fulfillment diversified enough to allow your business to control its own destiny?
In line with this last point, you’ll want to consider how much of your eCommerce strategy should include Amazon. If the last few months have taught us anything it’s that, while Fulfillment by Amazon (FBA) undoubtedly has its merits, there is risk involved in over-reliance on Amazon for order fulfillment.
A good portion of the sharp eCommerce gains of recent months are here to stay. Now is the time to examine your fulfillment and logistics infrastructure (warehouse network, shipping solutions and systems) to ensure your fulfillment engine can support this unprecedented growth opportunity.
If you’d like help with this analysis, contact the fulfillment experts at Amware Fulfillment for a no-obligation discussion.