Navigating the route to customer – channel and portfolio strategies
Back in March – seems like a long time ago now – we completed a piece of research in conjunction with Amplify-Global and Avalara on opportunities and challenges in international commerce.
Even before the impacts of the pandemic, eCommerce and marketplaces were highlighted as the greatest areas of future growth but with that growth came additional complexity. Understanding local customer delivery expectations and managing international trade and compliance were among the top challenges. Companies placed a significant reliance on third party logistics providers and benchmarking of marketplace and local retail offerings to provide local market insights and intelligence.
The restrictions on traditional retail during the pandemic have accelerated the growth of marketplace and ecommerce channels. Fedex ground revenues in the US increased by 36% over the last few quarters, Metapack reported parcel volume increases of 60% from March to June and in Ireland DPD reported over 100% increase in parcel volumes. These increases lead to concerns over peak on peak capacity requirements in Q3 and Q4 and we have seen some of the larger freight providers introduce peak season surcharges on deliveries.
Traditional retail is also changing. It is no longer just about brick and mortar as retailers expand their online offerings and position themselves as platforms rather than just stores. They look to engage customers with content, online and in store, leveraging their physical assets as part of their delivery network. Walmart’s involvement in the TikTok purchase, Best buy’s announcement that it would be using 250 stores as ecommerce hubs as part of a pilot and Target announcing that their holiday season staffing plans would enable them to scale same day and curb-side pickup are just some of the developments we have seen over just the last month.
Marketplace and social channels also continue to evolve. With the dominance of Amazon – certainly in western economies, brands find themselves needing a specific Amazon strategy as part of their overall channel portfolio.
Each customer channel represents a growth opportunity but also comes with channel costs, unique operational requirements and implications for overall brand positioning and relationships with customers. Supply chain executives have a key role in promoting a greater understanding of these choices and cost to serve while operationally enabling growth across multiple channels.
As we prepare for the 2020 holiday season here are some of the key things to expect;
- Capacity with parcel carriers will be tight and delivery performance will need to be managed carefully. If possible, spread the risk and volume across a few providers. This may also provide customers with additional choice.
- The shift in channels will also place addition strain on fulfilment and returns operations. The infrastructure required to support the same volume of sales in business to consumer channels will be different to retail and distribution channels.
- We are seeing signals from retailers that holiday season promotions will start earlier to spread the volume more across the season
- Covid will remain a factor through this season and is likely to change how consumers want to engage in the coming months. Safety is a new factor in how customers will shop with reduced store capacity and increased requirements for store pick up and local delivery.
- Retailers are looking beyond just store sales and your engagement with them will be helped if you can support them beyond the store. For example, can your supply chain support a much greater assortment on their online channels that you could fulfil directly to their customers?
Longer term supply chain plans will need to take account not only of expected growth rates but will also need to consider the portfolio of products, channels and geographies that need to be supported. This mix will determine the operational footprint and capacity required to support the business.
Supply Chain Enabled