Six Trends Driving Ecommerce Supply Chains Now

Ecommerce is a steadily expanding part of the retail space. Right now, the challenge is to serve always-incrementing ecommerce demand with supply chains that must continually extend and adapt to simply keep up.

1. Omnichannel continues to drive investment in brick and mortar

The ancient notion that you have to go digital to become truly omnichannel is yesterday’s news; companies that haven’t yet mastered ecommerce are so far behind they might as well not exist. Instead, the omnichannel universe is leading to expansion in the physical world. More stores are built that can serve as fulfillment centers for outbound shipments and customer pickups, inventory management and returns.

Buy online, pick up in store (BOPIS) has proven to be a breakout success, and the interplay between physical and virtual shopping channels strengthens both. The trend of online pure plays expanding to brick and mortar — often supplanting displaced legacy retailers — can be expected to continue.

2. Differentiation is the key to success

Competing with established online giants at their own game is a losing battle. Instead, success comes from focusing on what you do well and perfecting it. For example, Macy’s is finding success by leveraging its vast network of stores and quality private label brands, while Home Depot is one of the few shippers that genuinely understands how to facilitate heavy and difficult-to-ship merchandise fulfillment.

This competition among retailers results in the acceleration of customer expectations, serving them more efficiently, all while differentiating the experience along the way to deliver what they actually want.

3. Supply chains now have a front-row seat in corporate strategy

For organizations that were slow on the uptake, the past two years rendered the importance of supply chains in stark relief. Top-flight companies have long viewed investments in supply chains as crucial to remaining nimble enough to evolve with customers’ changing shopping demands and the vagaries of markets, modes and pandemics.

Agility and resilience must be built in. Logistics must be in place before you launch new services, but they must also be easily scalable to adjust for unplanned-for demand signals. The process should proceed like this: launch, evaluate demand signal, then optimize. The supply chain has to be in place on day one and flexible enough to optimize what the demand signals indicate.

4. The RFID experiment is over — it succeeded

Macy’s began implementing RFID technology in the mid-2010s to maintain accuracy in its inventory. The 95-98% confidence level the company has achieved on its inventory levels allows it to fulfill — using an effective “buy online, ship from store mode” (BOSS) — from more than 800 stores. At the same place in its lifecycle that bar codes were in the early 90s, RFID has become ubiquitous. Most retailers wonder how they lived without it, especially when the inventory counts that used to take all day now only take 15 minutes.

5. Don’t write off dropshipping

While some managers swear that 80% of their supply chain headaches are caused by the 20% of orders that are dropshipped, they’re not going to cut dropshipping from their distribution mix any time soon. It simply allows them to carry more SKUs than they would ever be able to hold in inventory.

Even large retailers with virtually limitless inventory capacity often include dropshipping on items where volume does not warrant internal fulfillment, but demand is strong enough to keep the item available to customers.

Intelligent fulfillment management requires analyzing which SKUs make the most sense to keep in inventory vs. which are wiser to dropship and constantly re-evaluating orders to optimize the ratio.

6. Nobody wants to pay for expedited shipping.

In a bit of a paradox, customers want fast shipping — but they don’t want to pay for it.

In the battle between those scenarios, free shipping beats fast shipping. None of the companies on this panel reported more than 1% of their orders sent with shipping that carries extra costs.

Home Depot has offered same-day onsite deliveries for professional contractors for years. Still, few contractors are willing to pay for two- or four-hour delivery windows, instead opting for flexible all-day windows or for doing the pickup themselves.

Locating supply closer to customers makes even more sense in a world where consumers want it tomorrow … but only if shipping is free.

Omnichannel — far from being an emerging component of retail — is a driving force of modern retail that is here now and here to stay. Only retailers in constant touch with evolving consumer expectations stand a chance of successfully fulfilling orders and keeping customers engaged. The agility to serve whatever comes next quickly and efficiently is of paramount importance.