What changing consumer behavior means for retail
Within a matter of weeks, COVID-19 fundamentally changed how consumers interact with retailers. Checkout lines were replaced by home delivery and curbside pickup. Grocery lists required preempted replacement options. Questions once asked of workers shifted to chat boxes.
In the early days of the pandemic, shoppers, out of fear of the unknown, ransacked store shelves to stock up on essentials, such as toilet paper and paper towels. Such an unexpected rush on consumer goods left many store shelves barren, shining a bright spotlight on the major gaps and inefficiencies within the global supply chain. Simply put, nobody — not suppliers nor manufacturers nor retailers — was ready for the unprecedented spike in demand brought forth by COVID-19
Nonetheless, as shelter-in-place took effect, online ordering surged. E-commerce spending in the U.S. spiked 30% from the beginning of March through mid-April year-overyear, according to market research firm Rakuten Intelligence.
And by the end of 2020, online orders are expected to account for as much as 10% of total purchases, a 6-7% growth compared to where online grocery ordering spending was before the pandemic.
The lesson to be learned: Investing in automation can empower retailers with the flexibility to sustain similar future spikes in consumer demand.
In this article, we’ll explain:
- Why most retailer fulfillment strategies don’t offer the flexibility to meet unprecedented consumer demand
- How retailers can future proof their businesses from unexpected disruptions by making strategic investments in automation
- Critical factors for consideration when selecting an automation provider
The top three challenges retailers are facing to meet sustained consumer demand
For many retailers, online order fulfillment has been a challenge since consumer behavior shifted from in-store purchases to internet buying. Even some of the largest retailers lack a fully optimized infrastructure to deliver goods in the timeframe that consumers demand, and COVID-19 has brought these challenges and several others to light:
As social distancing guidelines forced brick-and-mortar locations to limit hours or shut down completely, online shopping became the central channel for consumers to buy essential products. In fact, from February to March 2020, grocery delivery apps saw a 218% surge in downloads. To fulfill online orders, many retailers turned to in-store inventory and third-party services for picking and delivering. But these same businesses quickly learned that third-party services did not have the flexibility to meet increased demand, especially during peak ordering times
Despite the fact that third-party services tout their flexibility and ability to meet demand surges, they often struggle. Many turn to temporary hires (up to 300,000 delivery gig workers were hired during COVID-19). Even so, consumers still had to regularly wait for delivery time slots to open, which ranged from days to weeks to even months.
As a result, many customers canceled orders and jumped to competitors in search of a better experience, willingly forfeiting any loyalty that had previously connected them to the retail brand.
Traditional fulfillment strategies, like housing large volumes of inventory in one central location, don’t offer the flexibility to fulfill goods quickly. During the pandemic, in-store foot traffic and online orders increased, leaving store shelves empty. However, when non-essential retail stores were ordered to close, consumers shifted online to shop.
U.S. online sales increased by 49% when compared to the same time period from the previous year. And as we witnessed, retailers everywhere weren’t prepared for this.
If the pandemic taught retailers anything, it’s that they can’t always predict demand. To ensure quick response in the future, retailers need a more flexible distribution model.
Retailers have historically relied on manual labor as a temporary solution to address peak demand in fulfillment centers. In fact, during the pandemic, companies deemed essential, such as grocery, delivery and retail hired thousands of positions to address peak online order fulfillment.
Take distribution centers as an example. Some distribution centers rely heavily on manual processes more than others. As employees fell ill to COVID-19, distribution centers had to close to provide deep cleaning and sanitation.
When distribution is halted, it means the availability of certain products may be limited. And while consumers understood delays during the crisis, the reality is that they did not hesitate to jump to another retailer once they found the same product.
The reality is that supply chains remain too rigid to handle unanticipated surges in orders. As retailers and their supply chains face increasing pressure from sustained consumer demand, implementing automation can no longer be thought of solely as a cost-saving investment. In addition, retailers need to consider how automation allows for flexibility to not only survive but to flourish during future spikes in consumer demand.
At Dematic, we believe that this is the tipping point for automation technology investment.
Automation solutions to address unprecedented consumer demand
Automation in stores and distribution warehouses provide retailers with the flexibility to identify and adjust for swift shifts in customer traffic and buying patterns, both in-store and online. In addition, automation can keep fulfillment processes running in spite of other disruptions. Most importantly, automation helps minimize risks for employees working on the fulfillment front lines
Now that you understand why traditional fulfillment strategies aren’t working, here are some automated solutions that allow retailers to future-proof their business.
To avoid a bad customer experience, retailers can take ownership of the speed at which customers receive their online orders by automating the fulfillment process near to their end customers. Micro-fulfillment solutions:
- Can be implemented close to consumers in footprints as small as 10,000 sq. ft., such as in the back of a retail store or in a nearby dark store or urban fulfillment center
- Can be designated for e-commerce fulfillment so that retailers are no longer relying on in-store fulfillment for online orders
- Can be configured to allow retailer to react to peak demand quickly by shifting between online and in-store fulfillment