Future-proof retail operations in an era of supply chain chaos | Expert advice
By Jack M. Germain
November 5, 2021 9:39 AM PT
Due to the current pandemic-induced supply chain disruptions and changing consumer buying habits, an increasing number of retailers are considering closing storefronts and selling their selected inventory with purchase options. Direct to Consumer (DTC) on the Internet. A better option is for retailers to rethink their current business models and think about how to make their operations sustainable.
Direct-to-consumer brands have become increasingly popular in recent years. DTC traders see a digital marketplace ready to be disrupted as it fuels Millennials and Gen Z consumers with a constant appetite for digital shopping menus.
Closing physical storefronts in favor of DTC puts isn’t necessarily the best approach for typical store owners, according to Mark Delaney, retail consultant at Zebra Technologies.
The big manufacturers, perhaps, can do a kill by bypassing the brick and mortar retail route. But retailers that close their stores and move online only isn’t a smart strategy for success, advised Delaney, who has more than 20 years in the industry working with most of the world’s major retailers.
Adapt to DTC
Zebra develops tracking technology and retail solutions that generate actionable insights and insights. This technology gives retailers new visibility into their operations by giving tangible goods a digital voice.
However, not all retail brands easily move from store shelves to digital screens, Delaney proposed. DTC’s native brands have a competitive advantage since they were created for digital selling. Traditional retailers and consumer packaged goods (CPG) brands face great challenges in transforming their business models and adapting to DTC constraints.
One of the biggest advantages of physical stores is the ability for consumers to inspect products before purchasing them. Buyers enjoy seeing goods in person, as it helps prevent inaccurate sizes, faulty equipment, and product scams.
The E-Commerce Times engaged Mark Delaney in a high-profile conversation about current supply chain disruptions and changing consumer buying habits.
E-Commerce Times: Do you consider retailing DTC a bad strategy for struggling retailers?
Marc Delaney: Buying all kinds of stuff online is definitely something a lot more consumers are trying. But that tends to be for some products that don’t require buyers to undergo hands-on quality inspections.
Take me, for example. About three years ago my wife gave me a Harry’s membership [shaving products]. Since then, I haven’t even ventured down that aisle to a grocery store, or drugstore, Target, or whatever. This experience basically took me out of buying mode for that particular category.
But the whole philosophy of merchandising is based on foot traffic in the store. If I come to buy milk and bread, I go through the mouthpieces in front of the store and think of the chips. I also have beer and something else.
This is how we have operated for centuries. So it is very difficult to shop 100% online. I find that most of the fulfillment is still done in stores, although it might be more efficient from an electronic communication standpoint, just shipping direct to consumers.
Most retailers leverage their existing real estate to say I just need to get better.
How does the switch to DTC retail impact traditional retailers?
Delaney: Looking only at grocery retailers, pre-pandemic buying patterns indicated online sales of around 2%. Now for most retailers, depending on the retailer and geography, that number can reach 20 or 30%.
No retailer, or very few retailers, has had to develop an execution skill set from an e-commerce perspective. Now all of a sudden they’re being forced to do it at a rate that’s 10, 15, or 20 times higher than before the pandemic.
How can retailers solve the order fulfillment debacle?
Delaney: Retailers could introduce automation into the kind of transactional categories – canned pasta, cereal, canned goods, things like that, things you never liked buying in the first place. Then find a way to automate what we call the central store. Then take the experiential categories and really invest and build your brand around those changes.
Some retailers have built their reputations on the in-store experience to deter customers from buying online. They vary to varying degrees their selection of organic products and different types of products, different cuts of meat, etc.
To what extent is the curbside pick-up offering a way to retain customers who buy locally and have Covid-related health issues?
Delaney: I was talking to a major grocery retailer two weeks ago, and they asked an interesting question or comment. He mentioned that he didn’t think he would be able to get someone out of their car and enter the store to grab a cart, get the products to the checkout mat, then drag it to to his car. He had done it for them for free for the past 18 months.
This is an excellent point. Storefront retailers need to eliminate all transactional work related to consumer purchases. Retailers need to find a way to deliver these categories. Retailers can automate the buying process in some way. So really invest in another kind of store of the future that is half a distribution center. I think this is the winning strategy for the future.
What can in-store retailers do to work with their supply chain partners to improve fulfillment or open up different fulfillment options?
Delaney: There is a lot to be said about demand planning and demand sensing. It’s a big area in today’s retail space. This is an area where retailers can work closely with their supply chain partners.
Look at what’s going on right now. Dozens, if not hundreds, of barges and ships lie beside shipping ports that simply cannot fit into the regular supply chain.
So we need to look and see more effectively and work with manufacturing partners to understand what that demand will be over time. This is how retailers can make sure that at the end of the day they are happy with the customer.
The worst thing customers see when they walk into a store are the products they want out of stock. Customers then feel defeated even though they took the risk of being there during a global pandemic.
It seems that retailers need to think more about the essentials to make their retail business sustainable.
Delaney: Absoutely. Everyone went through a lot of new processes almost overnight. Whether it is Plexiglas or contactless, or sanitation, or curbside delivery. Temporary remedies have come together. As we start to emerge, retailers take a deep breath and say we need to find a way to do this better.
This is where Zebra Technologies is strongly engaged with our customers right now. We are trying to understand what the supply chain looks like for 2025 or 2030. What does the store of the future look like?
What are the absolutely essential technologies that retailers need to make their stores sustainable?
Delaney: First, retailers need to move away from paper and paper and join the digital evolution to modernize the way they do business.
Second, retailers need to ensure that every associate is both visible and optimally used to better serve customers in-store. We strongly believe that all these associates must have some kind of technology.
Third, retailers should remember that they are competing with a growing arsenal of online competitors. They have to use technology for better efficiency. Retail managers should have their employees networked in the store. Know where they are and what they are doing. Have a variety of task management apps available to get a feel for how to do things efficiently and how to measure one associate against another. Know which ones require additional training.
How else can retailers stand the test of time?
Delaney: For those retailers who are up for it, we’ve got a lot of conversations about automation. Automation could be as simple as mobile computers tied to data analysis. This could go as far as automating warehouses and back rooms for execution.
Even doing something as simple as buying online-in-store pickup to make money is something most retailers still can’t make it work. These are just inefficiencies in the way they do it. Retailers have yet to crack the code on how quickly they can pick and pack these orders.
It involves a lot of work, and work is becoming more expensive and scarce every day. It’s not going to go away any time soon. So this is forcing retailers to finally consider varying degrees of automation. For some retailers, automation can be as easy as switching from pen and paper to a laptop; to others it could mean setting up a micro distribution center at the back of the store.
Is offering door-to-door delivery to local shoppers a way for physical stores to compete with buying online?
Delaney: The last mile between the store and the customer has always been the biggest struggle. The last mile varies depending on where you live. Most retailers want you to be in the store or at the very least stop by for curbside delivery. Home delivery is by far the most expensive to provide.