eCommerce and gig economy disruption has infiltrated just about every shopping decision consumers make today, introducing countless delivery apps, the explosion of “click and collect,” as well as increasingly faster delivery options to consumer doorsteps.

You name it, consumers have access to whatever they want, nearly whenever they want it. And with ever-expanding online ordering options, today’s consumers have high expectations for their shopping experiences. “Digital consumers” are driven by rapid order fulfillment and delivery and are much more likely to shop if the retailer offers same-day delivery. 

So, what does this mean for retailers? For starters, “we don’t have this in-stock” isn’t an option. Consumers expect retailers to have an infinite shelf of inventory in real-time. Whether consumers are placing orders online or simply researching to shop in-store, they expect online inventory to match what’s on the shelf. And so the retail supply chain for businesses of all sizes are struggling to sustainably and profitably address order fulfillment and rapid delivery. Specific challenges include:

• The urbanization trend affecting industries and challenging how retailers use space and house inventory

• Traditional distribution strategies that no longer work and short-term fulfillment solutions that drain profits

• Finding the right mix of existing store fronts, urban fulfillment centers, and possibly dark stores for the optimal fulfillment, distribution, and delivery strategy

• Understanding how micro-fulfillment can meet the order fulfillment requirements created by modern consumer demand 

Across the globe, people are moving to cities at rising rates. In the U.S. alone, 65% of the population live in cities and generate 75% of the nation’s gross domestic product. Worldwide urbanization trends are projected to continue, with the urban share of the global population expected to surpass 66% by 2050 (up 30% from 1950).

Rapid urbanization presents challenges to the general population (such as transit congestion), but also for retailers — greater demand for real estate from a reduced supply brings higher costs for less space. 

Urbanization is also changing inventory and distribution strategies, previously dominated by huge distribution centers in remote locations. While that approach may be cost-effective, how can a distribution center in a distant rural highway exit effectively support same-day fulfillment to retail stores or consumer homes in a downtown neighborhood? It’s fundamentally impossible. 

And while some retailers have started using urban fulfillment centers and dark stores to better address rapid delivery demand, they are still challenged with steep real estate costs, unused space at the back of stores, and lost revenue at underperforming retail locations. 

Retailers now must balance the high cost of inventory needs in urban locations with the rapid delivery requirements of online orders.

For some, this means partnering with third-party services to outsource order-picking and delivery. While these services get consumers what they want, retailers have realized that outsourcing picking and delivery to third-party companies hurts their bottom lines.

Here’s why:

• Shopping Experience: Retailers lose control over the consumer shopping experience when they outsource to third-party apps. If an order is delayed, if an item needs to be replaced, or if the order shows up damaged or incomplete, who will the consumer hold accountable? More than likely, the retailer and it brand will take the hit. 69% of consumers say they’re more likely to shop at a competitor after even just one bad experience: Total Retail report

• Consumer Data: Retailers also relinquish ownership of coveted consumer data when using third-party services. Buying patterns and brand preferences become insights owned by the third-party, which is problematic for retailers with consumers expecting a personalized shopping experience. 65% of consumers say they want personalized recommendations from retailers: BRP study

• Order Fulfillment: Fulfilling online orders through only in-store inventory is not efficient. It reduces in-store supply and makes real-time inventory management even more challenging for retailers. It hurts profitability — especially for grocery retailers already fighting tight margins. Fulfilling online orders from in-store stock also inhibits the experience of in-store shoppers by creating competition for high-demand items and increased aisle traffic. 85% of grocery shoppers still shop in-store or mostly in-store, with their loyalty at risk with 97% of grocers experiencing in-store stockouts throughout the year: Grocery Insights report