Retail is evolving at an unprecedented pace as today’s consumers expect greater convenience, faster delivery, and personalized experiences. One of the key drivers behind this transformation is urban fulfillment, which is reshaping retail strategies and supply chains to better serve city shoppers.

As delivery windows become shorter, retailers are moving from traditional national hub-and-spoke models. Instead, they are adopting regional and local fulfillment approaches, including point-to-point delivery. This shift is changing the landscape of fulfillment operations, with regional and local fulfillment centers, sortation centers, and delivery stations increasingly taking the place of large national facilities. These changes are designed to meet the growing demand for speed and flexibility in urban retail.

This article explores how urban fulfillment is evolving (including the challenges and opportunities of this trend), highlights innovative retailers who are adapting, and looks at how to adjust supply chains for this city-focused approach.

Urban fulfillment is how retail businesses meet the needs of city shoppers. As more people move to cities, customers want quick and flexible shopping experiences with easy access to products and services. Urban fulfillment combines stores, fulfillment centers, and digital tools to offer fast delivery and pickup options that suit city life.

Here are some ways urban fulfillment works:

• Opening smaller stores or dark stores in or around busy city areas. 

• Using data and AI to understand city shopper needs and predict what they want. 

• Offering more fulfillment options like same-day delivery, local distribution hubs, and improved click-and-collect services. 

• Using digital and social media to connect directly with customers and provide personalized, on-demand experiences.

Many retailers are changing how they serve customers and manage their supply chains.

• Amazon: Builds micro-fulfillment centers and uses last-mile delivery services to ensure quick service. With a Prime membership, customers can receive deliveries on the same day or within two hours in many cities. Amazon Go stores allow customers to shop without checkout lines by blending convenience and technology.
• IKEA: Evolved from large warehouses in suburbs to smaller stores in cities for urban customers. These new stores include digital tools that help customers see and customize their purchases before delivery.
• Target: Uses some of its stores as mini-distribution centers. This helps the company fullfil online orders directly from stores, which cuts delivery times and costs. Target also offers a drive-up service, letting customers pick up orders without leaving their cars.
• Walmart: Uses drones and self-driving vehicles to provide faster local service. Walmart has also improved its pickup and delivery options by using its many physical stores as fulfillment centers.

Retailers are working to connect better with their customers. This change brings challenges and opportunities to consider.

• Landmark a forward-thinking global retailer, turned to Dematic to enhance the efficiency and scalability of its main distribution center. This collaboration empowered Landmark to process orders swiftly and manage inventory more effectively. As a result, customers can look forward to faster delivery times, perfectly aligned with their evolving needs.
• Radial recognized the pressing need to elevate its order fulfillment process to meet the soaring demands of omnichannel retail and boost efficiency. In a bold move, Radial purchased a solution from Dematic featuring 299 Automated Mobile Robots (AMRs). This strategic investment streamlines order processing, accelerates order handling speed, and reduces operating costs. By embarking on this journey, Radial delivers faster and more reliable order fulfillment, enhancing customer satisfaction and solidifying its competitive edge in the market.

With a trusted advisor and long-term strategic automation partner, retailers can improve their supply chains to better meet customer needs for easier access to products. 

Here are some steps to consider:

• Set Up Micro-Fulfillment Centers: 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 or further automate with a goods-to-person solution installed in the backroom of the store. Retailers can use empty stores or unused square footage in existing locations as micro-fulfillment centers. A metro hub can also be considered to fulfill for a certain area. And instead of stocking it with most of the inventory for a store, only stocking it with a few, high-demand items. These centers help process orders faster and reduce delivery times, which can lead to more profits over time. For example, Tesco has worked with Dematic to set up Urban Fulfillment Centers in several UK stores. These centers allow Tesco to handle more orders and improve order tracking.

• Use Predictive Analytics: Predictive analytics help retailers forecast what customers want and manage their inventory better. By looking at past sales and current trends, retailers can keep popular items in stock at urban fulfillment centers, which helps expedite delivery. For example, Adidas uses Dematic software for predictive analytics to improve its supply chain. This setup has made Adidas more efficient, shortened lead times, and increased customer satisfaction by ensuring products are available when and where they are needed.

• Try Different Delivery Methods: Now is the time to explore urban delivery methods to meet needs of customers both today and into the future. Using smaller vehicles, bicycles, and scooters can make deliveries faster and reduce carbon emissions. Walmart tested autonomous delivery vehicles and drones to improve speed and efficiency. By partnering with companies like DroneUp and Gatik, Walmart has improved delivery times, increased customer satisfaction, and lowered costs. These actions make urban logistics better and more sustainable.

• Redesign Store Layouts for Online and In-Store Customers: Retailers can redesign their stores to better support both in-store shoppers and online orders. This might include creating specific areas for picking and packing online orders or using automated storage systems. For example, Kesko (Finland's second-largest grocery retailer) uses AutoStore™ technology in its Ruoholahti superstore to fulfill online orders. This technology helps Kesko manage more orders while being flexible in how they fulfill them. It also enhances the in-store experience for customers by moving most online order picking away from customer areas.

• Partner with Delivery Services: Retailers can improve their delivery options by working with third-party logistics companies or last-mile services like Uber Eats or DoorDash. For example, Charles Tyrwhitt, a clothing retailer, is partnering with Amazon to better serve its customers' delivery needs. This partnership allows for faster and more reliable shipping. By using Amazon's logistics, Charles Tyrwhitt can process online orders more efficiently. While Charles Tyrwhitt does not sell directly on Amazon, it benefits from Amazon's delivery skills, which help create a better customer experience.

• Emphasize Sustainability: Retailers can make their supply chains more sustainable through automation that reduces energy use, carbon emissions, and workforce needs. Right-sized packaging and vertical solutions to minimize waste and maximize space. By maximizing vertical space, you can create more storage areas with bespoke racking and automated storage systems. Combined with software that optimizes inventory and routing, this saves on transport costs and lowers emissions. Ergonomic and noise-reduction features to improve working conditions. As a sustainability partner, Dematic is dedicated to helping create sustainable operations.