Rethinking Supply Chain Operations With the Reemergence of Physical Stores
Like a phoenix from the ashes, brick and mortar is rising as something stronger, smarter, and more powerful than before.
Retailers of all sizes should pay attention because this reimagined real estate will impact customer experience, business operations and supply chain functions. What does that mean to your company and its supply chain?
U.S. retailers have been steadily investing in their e-commerce infrastructures and capabilities to meet growing consumer demand for online shopping.
As consumer demands have mounted, one of the biggest challenges has been adapting warehouse and distribution systems and processes to deliver products quickly, within days or even hours.
In a survey of U.S. online shoppers, more than half (53%) said they won’t purchase a product if they don’t know when it will arrive.1 Gen Z consumers (under the age of 25) have the highest expectations, with 54% of those surveyed naming same-day shipping as their number one purchase driver.
In a strange plot twist, consumers have increasingly voiced their desire for an engaging and convenient retail store experience.
Among Gen Z consumers surveyed, 73% said they used in-store for discovering products; 65% said they liked in-store for trial; and the vast majority –81%–said they like to purchase in-store because it allows them to “disconnect” from the trappings of social media.
What on the surface appears to be conflicting consumer behavior is actually evidence of the growing demand for a more dynamic retail experience, both from the consumer’s perspective. But how do retailers and brands meet this demand?
Online and in-store operations converge
Leading retailers, including Amazon, Walmart, Target, Kohl’s and Nordstrom, have been well ahead of this trend, making investments in physical stores and industry partnerships to satisfy this consumer desire for a hybrid shopping model.
For example, Target has been heavily investing in both its online and retail store channels. The company has improved its “same-day” services, where consumers pay for products online and pick up in-store (Drive-up and Pick-up), with millions of consumers in 2020 taking advantage of these fulfillment options.
At the same time, it plans to open 30-40 new stores each year, including small-format stores designed to “meet community needs in urban centers, college campuses and dense suburban cities across the country.”
Online shopping pioneer Amazon, which has opened small, physical retail outlets for books, groceries and its 4-star items in recent years, announced in August 2021 its plans to open 30,000 square foot department stores that will sell a variety of clothing, household items and electronics, starting with sites in California and Ohio.
Walmart recently announced that purchases made by consumers from its Walmart Marketplace partners can now be returned to Walmart retail stores.
This is similar to the approach taken by Amazon and Kohl’s through which goods purchased online through Amazon can be returned to Kohl’s locations.
3 key factors to consider
The bottom line is, no matter how fast online shopping grows, consumers still find value in brick-and-mortar retail stores. Savvy retailers are answering that call by taking innovative approaches to how they leverage their physical stores.
Whether it is providing more immersive or value-added in-store experiences for their customers, or leveraging the store for order fulfillment or returns processing, retail real estate is no longer just products on display, but rather omnichannel hubs…
Here are three key factors to consider when pursuing an omnichannel shopping experience:
Build flexibility into your supply chain operations
To adapt to changing consumer demands, you need order, warehouse and transportation management solutions that are flexible to accommodate a shift in any direction.
Taking a holistic approach with a single, enterprise-wide lens that supports both the online and physical retail elements of an operation allows supply chain practitioners to easily redirect resources and inventory to where it is most needed.
Consider the customer experience
Consumers today expect both the online and in-store experience to be easy, fast and convenient. Whether they are purchasing online and picking up in-store, visiting a store to physically see a product before they purchase it online, or using a retailer’s e-commerce portal to find items in-store locally, they expect a cohesive and seamless experience.
To facilitate a successful omnichannel approach, an order management system with capabilities that support these customer behaviors, such as online and in-store inventory visibility, and multiple pick-up and delivery options is likely warranted.
Analytics have never been more important
In a rapidly changing retail environment, retailers need access to real-time data and analytics on which to make proactive versus reactive decisions.
This is especially important on matters of supply chain management, where robust business intelligence tools provide valuable insights into inventory, dynamic order fulfillment, and order and customer profitability.
Retailers can use this information to monitor performance and adapt to customer expectations and preferences.
The retail landscape is constantly evolving, driven by changing consumer preferences for the way they interact with brands and procure products. Consumers want to get the products they desire, when and how they want to get them. In most cases, that means fast and easy access.
While the online shopping experience typically meets that need, retailers can’t forget the re-emerging power of the physical store as a complementary value-add.
Today’s generation of consumers do not distinguish between online or physical retail, but instead, expect the brand to provide a seamless experience.
After all, why would two branches of the same tree not connect? Among consumers surveyed, 60% said they always or sometimes check a store’s in-store inventory availability online before visiting a store to make a purchase.
The challenge for retailers is to unite their online and in-store channels on the back end through a solid, yet adaptable, logistics infrastructure that supports a consistently positive experience for customers no matter how they choose to shop.
Guy Courtin is a respected thought leader and speaker on the topic of the future of retail. In his current role, he leads omnichannel supply chain technology provider Tecsys’ go-to-market strategy.
Guy is a RETHINK Retail advisor and has been featured on numerous industry publications, podcasts and panels speaking on the evolving retail ecosystem, the role of technology, and the interplay between physical and digital customer experiences. He offers insight into the future of the store, the new goalposts for customer loyalty, and how hybrid retail is forging new shopping paradigms.