Getting Closer to the Consumer

Anyone running a successful business knows the critical importance of making the wants and needs of their customers their first priority. General Merchandise (GM) retailers have been specializing in this forever. You want a sky-blue, full-suspension, 30-gear mountain bike with a child carrier? No problem, you got it. You want a string of solar-powered lights that twinkle and pulse to show off your garden at night? Sure, here ya go. You want a special form so you can bake a cake in the shape of a 17th century pirate ship? Right. How many?

And no matter what your specific wishes might be, GM retailers are following the same simple rule to make them come true: Customer First

This rule is about much more than just offering a wide range of products. It’s a special mindset, a proactive approach to meet long-term wants and needs. However, those customer wants and needs are never static ― they are constantly changing. And current circumstances have only accelerated those changes.

New circumstances, new challenges

The growth of e-commerce has been a trend for some time and most GM retailers have been adjusting their supply chain accordingly, including omnichannel strategies to maximize inventory efficiencies. But when the pandemic hit, customer options like click & collect suddenly advanced from “nice to have” to “absolutely necessary.” According to McKinsey, ordering online and picking up at store became the fastest growing omnichannel ordering model, with growth of anywhere from 40% to 70%, depending on the product.

On the other hand, the pandemic possibly created a slight pause in another major consumer trend: urbanization. But there is little doubt as the world recovers that it will again pick up speed. By 2030, 60% of people will be living in urban environments. As this happens, the cost of servicing customers in cities will continue to increase. More people shopping in denser areas with higher expectations for delivery speeds and shopping options creates quite a new challenge for GM retailers.

Figuring out how to get closer to the consumer

Retailers have recognized these developments and are feeling the pressure to act. Many are looking to shopping centers for solutions. Counterintuitive as it may seem with so many recent closings of physical locations, shopping centers retain value as sizable locations that are close to consumers.

Some operators are already conducting trials, initiating shared logistics services that enable retailers to offer home delivery and click-and-collect options with pick-up instore or curbside. This concept is known as shopping-centers-as-a-service.

Amazon is currently taking this a step further by purchasing disused shopping malls and turning them into fulfillment centers. Between 2016 and 2019, Amazon converted around 25 shopping malls, according to an analysis by Coresight Research. But clearly this is not a viable option for most retailers.

Retailers with existing storefronts have been amping up their click-and-collect efforts to take advantage of their presence near their customers. Another variation on that same theme are dark stores, which fulfill orders directly to consumers out of a warehouse or vacant store. Similarly, urban/metro e-commerce (or “metro hubs”) focus on high demand items that can be fulfilled quickly as a subspace within an existing distribution center or smaller, pop-up facilities.

Different needs, limited choice

But what’s the best solution? Well, that’s the thing ― there is no single best solution. There is such a wide variance in the size of GM retailers and the type and number of items they sell that “one size fits all” is not remotely possible.

Still, GM retailers are searching for the right solution for them. And as the search intensifies, more and more start-ups and single-solution providers are emerging to offer their ideas. Some of them are truly innovative, and at first glance, what they are pitching can be enticing.

But a closer look typically reveals that they a very limited amount of actual answers in their portfolio. The consequence: Their business model is to bend the GM retailer to what they offer rather than what the retailer needs, which is ironic: GM retailers, whose mantra is as you recall “customer first” are now in a position where their own wants and needs are made secondary (or worse).

Closer to consumer by putting the retailer first

The most important question should be: What do GM retailers really need and want in times of changing circumstances and challenges? A partner who can provide a variety of business solutions and who can (even more importantly) help navigate through all options. A partner with the willingness to provide solutions that best match the retailer. Whether that might be click & collect, a dark store, a metro hub — or something else entirely.

To get closer to their consumers, retailers need to use every advantage they have. That can be the real-estate they already own with existing stores. But whatever it is, they need to look to optimize the use of all assets by putting their own needs first.

In-Store Fulfillment

Maybe the most obvious solution for a retailer to get closer to the consumer is to take advantage of the physical locations they already have. Generally, any storefront that survived the recent recession is accessible to a viable number of customers. Those same customers are no doubt also making online purchases, so why not fulfill some of those orders from those locations.

The concept of micro-fulfillment (using the inventory at a store location to fulfill online orders) is not new. Grocery retailers have been quick to embrace it. But now GM retailers are beginning to see the advantage.

Micro-fulfillment is a great entry point for retailers to get closer to consumers. With some relatively straightforward software add-ons or upgrades, retailers can set themselves up to manually pick online orders from in-store inventory. A step up from there could be adding pick carts that staff can roll to pick from inventory in the backroom. And finally, full automation with a full goods-to-person solution like the Dematic Micro-Fulfillment solution installed in the backroom of the store.

Dematic is currently working with a retailer that is taking its own unique approach. They have installed a goods-to-person solution in their backroom that, as a first priority, replenishes only in-store shelves during overnight hours. Labor challenges made it their most critical issue. In the future, they will be using the solution to fulfill click-and-collect and direct-to-consumer orders, which is usually the first priority for automation. The takeaway here: The retailer implemented what works best for them.

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