Looking back at Christmas sales from 2016, one thing is clear: bricks-and-mortar retail has remained static while e-commerce continues to grow. Could integrated omni-channel distribution centres (DCs) be the ideal solution to support all channels?
In the build-up to Christmas, Saturdays tend to be fairly weak sales days online, while Sundays are among those with the highest turnover. Black Friday and Cyber Monday promotion weekends also contribute to online retail peaks.
On average in Europe over this period, offline turnover loses 1%, while there is a rise of 15% in the online sector, and this trend is set to continue. However, this switch to online purchases does not mean an inevitable loss for retailers.
Innovative – and successful – retailers seamlessly combine online stores and branches into a consistent shopping experience. Studies show that customers who are the focus of several channels shop more frequently. Concepts such as ‘click and collect’ can also contribute to an increased turnover.
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E-commerce and food
In Europe, the turnover of the food e-commerce industry in Germany lags behind other countries, while the UK and France remain ahead. One of the reasons for this is each country’s dense network of retail branches, which offers greater convenience to the consumer.
However, there are signs of change, with the number of physical food businesses in Germany falling from 43,867 (2006) to 38,525 (2014). This has a negative impact on the agricultural sector.
In addition, e-commerce models are more focused on metropolitan areas so as to minimise delivery costs. In rural communities, the costs for last mile deliveries are much higher, and consumers are not yet ready to pay more for this service.
Logistics must offer support
Regardless of how the retail market reinvents itself, logistics must offer 100% support across all the different channels. They all need customised logistics processes in order to reach the required level of service.
New concepts cannot be implemented into existing logistics structures by established companies. For example, it is not possible to pick orders for direct shipping and send packages from a warehouse supplied with products from a few hundred branches. There are too many different parameters.
Outsource new processes
One possible solution could be to transfer new processes to a separate location, and supply it from a central warehouse. For example, it could carry out direct deliveries with adapted order picking methods and packing lines.
Various retailers have adopted this method in reacting to the e-commerce boom. However, this relatively simple solution is not economical in the long term, due to increased inventories, over-handling of products, and a lack of flexibility.
In order to be successful, as well as offer new services, alternative logistics solutions are required. These must be completely adapted to match the omni-channel world.
An integrated omni-channel DC is the ideal solution for economically mapping logistics for all channels. Such a DC offers optimal processes for the individual channels in order to supply branches and consumers efficiently.
In food retail, this would be a combination of pallet warehouses and ACP (automated case picking), in which full containers are picked from pallets or carts. This also acts as a replenishment system for picking individual units for direct shipping.
In turn, this solution can be used for picking individual units for branches. For example, an ADAPTO shuttle system, which supplies products to ergonomic PICK@EASE goods-to-person workstations, could be implemented.
Creating added value
Experience shows us that there are, in fact, synergies between offline and online channels that are only noticeable at second glance. Thus, branch orders often smooth out the peak loads, which sometimes result from direct shipping, or even in reverse.
At Vanderlande, we possess both the experience, and necessary technology and concepts to create a state-of-the-art intralogistics solution, which completely supports any business model.
Regardless of whether a retailer has online or offline capabilities, a combination of both, or is new to the market, we are able to consult on the optimal solution for their requirements.