2019 brought a whirlwind of change for retail due to fast-paced e-commerce innovation. E-commerce sales are set to reach nearly $26.1 trillion by the end of 2020, and consumers have become more fickle in their ever-changing customer expectations. We saw long-standing brands like Payless and Barneys file for bankruptcy and newcomers reach unicorn status with billion-dollar valuations.
What does 2020 have in store for us? Here are five trends we’re watching out for.
Finding A Balance In Speed, Cost And Experience With Smart Orchestration
Last year, Amazon and Walmart raced to the bottom with one-day delivery while many retailers struggled to balance delivery speed, transportation costs and customer expectations. This year, FedEx and UPS announced they would slap additional surcharges on bulky parcels, forcing retailers to rethink shipping strategies to get larger items to customers.
In 2020, brands will use their logistics networks and distribution centers to their advantage, connecting infrastructure to efficiently consolidate loads. Others may opt for smart orchestration—using automation to upgrade or downgrade carrier service levels, keeping customer delivery promises. Tom Enright of Gartner also supports using price levers and incentives to propel appropriate shipping speed selection instead of continuing the race to the bottom.
One-Day Delivery Will Overrule Sustainability
As e-commerce grows and customers demand items faster, it has become difficult for retailers to consolidate packaging and transportation. According to a 2019 survey we conducted of over 2,500 American consumers, the demand for fast delivery rose greater than any other factor since 2018. To make matters worse for the environment, we found that 95.6% of shoppers weren’t willing to trade speed for package consolidation.
While retailers like Amazon can afford to invest in carbon-neutral emissions vehicles to offset speedy delivery, smaller retailers will be forced to choose whether they want to pursue the fast and free delivery race that Amazon started. Instead, Enright suggests that it’s crucial to first understand customers instead of following trends around speed. If there is indeed a need for speed, it’s possible to incentivize sustainable fulfillment options for those who want them.
AI: Retail’s Competitive Advantage
In 2020, we’ll see supply chain teams realize the promises of AI, garnering insights on how to improve KPIs like on-time performance and cost to serve. This year, through technology and development in automation, retail supply chains will evolve from being a cost center to an investment for their entire organizations. McKinsey & Company (via SupplyChainBrain) even projects that businesses will gain “between $1.3 trillion and $2 trillion each year in economic value by using AI in their supply chains.”
While many retailers use spreadsheets to patch data together, AI can make it easier to surface real-time data needed to take action. This real-time, self-learning data will become a ledger of truth for every department, from logistics to e-commerce, involved in making decisions around the last mile.
Cracking The Omnichannel Code
Accessibility to AI and automation enables brick-and-mortar retailers to move seamlessly across channels. As physical and digital converge, retailers need to deliver a fully integrated shopper experience to win. According to research conducted by Forrester and IBM, 94% of retailers consider omnichannel fulfillment to be “a high or top priority.” Meanwhile, 7 in 10 shoppers are unlikely to make another purchase from a brand following a poor delivery experience.
With visibility into real-time data and the power to connect datasets, brands can more easily maneuver between channels and silos, impacting end-to-end forecasting, in-store pickup and more. Amazon has taken a leap into the physical world, establishing Amazon Go in 2019, using technology to connect its customer data across channels and allowing Amazon users to skip checkout. Amazon’s 2017 acquisition of Whole Foods has given the brand hundreds of physical outlets where customers can pick up online orders and take advantage of Prime discounts.
The Changing Face Of The Storefront
With population shifts and urbanization, the store will look different in 2020. Stores will become showcases, providing immersive services. Innovators such as Ikea are focused on this today, creating urban centers for customers to browse, take advantage of in-store services and send items straight to home delivery. We’ll see more brands emphasize experiences over selection in a quest to create high lifetime value (LTV) brand advocates.
Additionally, stores are an increasingly essential asset for swift, low-cost order fulfillment. They provide an efficient alternative to centralized warehousing, from which shipping can be more expensive than using local outlets as de facto distribution depots.
We’ll see more retailers leverage distribution centers to provide efficient services for customers and turn unused back-of-store space into automated, hyperlocal mini-fulfillment centers, following Target’s lead. Store-to-store shipping and ship-from-store home delivery will help stores maximize their potential.
As they offer experiences for shoppers, stores will also hone their buy online, pickup in-store (BOPIS) strategies for customers who want hassle-free order pickup. Look for more self-service lockers or towers and curbside delivery services to add another dimension to store fulfillment.
One Thing Is Certain: The Customer Will Win
With retailers racing to match Amazon in speed and cost, it’s critical to manage expectations across the customer journey. By making accurate promises and investing in the tools that help keep them, retailers will leapfrog their competition.
If the last few years have indicated anything, it’s that an evolving supply chain benefits all consumers. With the growth of technology and competition, consumers can demand more from their retailers. Not to fear: With so much data, insights and technology, 2020 is a year of empowerment for retail supply chain leaders. The ability to make smarter, data-driven decisions creates predictable experiences that customers demand. Those who succeed will be able to retain customers while efficiently managing costs, leaving everyone else in the dust.