Over the last few months, ecommerce volumes have continued to surge. August was Australia’s biggest month for ecommerce, with Australia Post reporting an 85 per cent increase in online shopping growth compared to last August.
While the momentum in online sales presents great opportunities, the current distribution centre network strategies of retailers may not be able to keep up with the demand.
Many retailers are currently operating out of a national distribution centre, with one major distribution centre servicing the whole country. With less air freight between the states, getting products across the country is difficult enough, let alone meeting consumer appetite for faster delivery times.
With the growth of ecommerce and this age of immediacy, customer expectations for same day delivery is mounting.
This will push organisations to move from a national distribution centre model to a regional distribution centre model with inventory in each state. But to achieve such short delivery times, retailers will also need to examine their last mile logistics strategy.
From a national to regional distribution centre model
Prior to COVID-19, many companies were looking to create the leanest and most cost-effective way to serve customers, which led to the consolidation of operations in a national distribution centre. In some cases, this led to highly automated facilities that created immense operational savings.
While this model is still very effective for some businesses, for those with growing ecommerce sales, the tyranny of distance is becoming so prohibitive in the ability to meet consumer expectations for fast delivery.
Retailers need to be agile, as there is a plethora of alternative options only a click away for consumers. Those who don’t meet customer demand risk losing sales to their competitors, a much more expensive exercise than investing in regional distribution centres to serve their customers faster and more reliably.
Achieving same day delivery
First a retailer must understand if their customers require immediacy of delivery. A clear fulfilment strategy stems from a clear ecommerce strategy where a retailer understands whether same day delivery is a desire of their customer base or a potential point of difference.
Once the necessity for same day delivery has been established a retailer must assess how they achieve it. This could be through a brand to consumer fulfilment strategy, an omnichannel solution with orders coming out of stores or a micro fulfilment strategy with fast moving goods close to customers in dark stores.
The best solution for a retailer needs to be considered as part of their whole supply chain strategy and have customer experience at its core. Gone are the days of packages being thrown at your doorstep if you want to retain your customer. This will likely lead to more retailers creating greater in-house capabilities with transport and their own distribution centre to ensure a positive customer experience.
In conclusion, retailers looking to succeed in ecommerce will need to adopt a regional distribution centre model, as a failure to embrace decentralisation may result in the costlier consequence of lost customers.
Travis Erridge is CEO of TM Insight