28/09/2020 | Florian Sauvage, Solutions Consultant, Hardis Group
During the COVID-19 lockdown, retailers had no option but to make organizational changes—as best they could—to continue serving consumers while complying with government guidance. These changes had substantial knock-on effects across logistics, transport and store operations. Nowhere else was this shift felt more keenly than in stores. What were once points of sale where customers flocked for in-person advice and social contact had to adapt quickly so they could offer—and deliver—omnichannel services. So what does the future hold in store?
In the past, stores were envisioned merely as places for advising customers and converting sales. Those days are long gone. Now, stores have to offer an extended suite of services—from finance, loyalty programs and gift vouchers, to assistance, click & collect, drive-through collection, home delivery, and more.
Changing consumer practices
At the same time, today’s consumers have embraced omnichannel retail, want to get their hands on their products faster than ever, and are increasingly turning to local stores. And all of this comes among a growing trend toward ethical consumption, with heightened interest in recycled, organic, locally sourced and fair trade products, among others.
E-commerce has been the big winner from this shift, as online purchases make up an increasingly large market share (10% in 2019, source: Fevad). This trend is only likely to continue in 2020, as consumers stick to the habits they developed during lockdown—when retailers saw online sales balloon by 83% (Fevad figures for H2 2020, press release of September 9, 2020).
Stores will need to make further organizational changes in order to cope with the growth of e-commerce.
Learning from best practice in logistics and transport
Although 95% of physical stores remained shuttered during lockdown, those retailers that had the foresight to embrace drive-through collection and dark store models managed to continue trading at pre-lockdown levels. Some even saw their business grow.
Converting stores into processing points for customer orders is a new opportunity to drastically reduce stock-outs, keep stock immobilization to a minimum, and optimize sales-floor productivity. But doing so means adopting, and coming to terms with, some tried-and-tested concepts from transport and logistics: managing stock availability, scheduling orders (including sales floor restocking), and organizing transport and reverse logistics.
Their close proximity to consumers gives stores a major geographical advantage, making them natural pivot points between central stock (at logistics warehouses) and consumers.
Stores: the new kid on the block in urban logistics spaces?
Stores should also seriously consider becoming an active participant in urban logistics spaces (ULS)—zones where transport flows are consolidated, outside an urban area, in order to limit the number of transport vehicles on the road in cities. The number of established ULS remains limited for reasons of competition (product-related confidentiality and differentiation), organization (load break, service costs, etc.) and local policy (private initiative vs. public service).
Nevertheless, stores should see ULS as a chance to shrink their carbon footprint while increasing sales-floor productivity (which fell by 5.5% between 2015 and 2018; source: fcd).
For retailers that have, or intend to, bring new logistic processes in store, the opportunities are numerous:
- Splitting workload between the sales floor and the warehouse to cope with temporary peaks in activity (Black Friday, sales, special offers, etc.).
- Having access to overall stock in order to limit local stock-outs.
- Managing stock and flows for another store (restocking and orders).
- Generating additional footfall by offering a click & collect service on the sales floor—on average, stores that combine e-commerce and bricks-and-mortar retail achieve increased sales of 14% (Oxatis survey: Le Profil du e-commerçant 2020)
- Demonstrating their social responsibility by pooling stock and preparing orders closer to their customer catchment area, which in turn reduces delivery lead times, limits transport distances and, in some cases, cuts transport-related costs.
As the final link in the distribution chain, it rests with stores to continue meeting consumer demand while keeping their environmental impact as low as possible.
Since scalability isn’t always an option, optimization is an essential driver of growth. And pooling flows between logistics platforms and stores is a win-win arrangement that unquestionably merits further exploration.
But, as ever, there’s a catch: stores are not logistics hubs. Without simple, efficient processes, there is a risk that adopting this model could do more harm than good. In other words, addressing local needs is all well and good, but it’s important not to overlook the fundamentals.
Real time: a necessary path to performance
These changes require an information system that can identify stock levels at all storage locations. In other words, stores need a real-time stock management system to help them process all physical flows.
There are various options out there: some POS, WMS and ERP software publishers have developed solutions that offer these features, while other retailers have opted for proprietary systems that cover some or all of their flows.
Whatever path they choose, businesses in the distribution chain will need an information system they can rely on—one that allows them to pro-actively channel orders to the appropriate location for preparation (warehouse or store). With the right system in place, retailers will be able to cope with a rise in online orders, increase stock rotation in store, reduce transport volumes, drive up store productivity, and reduce the number of unsold items returned to the platform.
In conclusion, consumers still prefer to buy from a physical store because of the social aspect of in-person shopping. That isn’t set to change any time soon. And as stores evolve, they’ll become an even more important part of the communities they serve. Yet today’s stores are much more than mere points of sale. They serve multiple functions: advice, sales, logistics and despatch.
Looking to the future, stores have an opportunity to strike a compromise between the two imperatives facing the retail and distribution sector: reducing its environmental impact and shortening delivery lead times.