The rise of eCommerce and fulfillment did change the retail landscape dramatically in the past decade.
Online was the trend and fulfillment centers dominating the world of distribution. Downside was that traditional retail relying on offline networks (physical stores) struggled and several went bankrupt.
Are the current eCommerce business models still valid?
6 trends which indicate that there are changes upcoming, which will redefine the current landscape and will have impact on current supply chains.
Trend 1. Successful retailers will effectively integrate offline and online combinations
While the eCommerce industry is booming and growing at a fast pace, there are a few companies who are taking up the major market share. As the consumer dollar can only be spend once, the loser in this game seems to be the offline retail shops. But luckily for them, that seems to change. Major retail companies acknowledge that the success will be in a balanced combination of online and offline stores.
Amazon has now grown into a full-fledged online store with a range of products including electronics, clothing, software, pet supplies, and of course, books. But is Amazon only in online sale?
With its Amazon Go they are exploring the path of offline retail. Operated by the online retailer they opened (2015) a chain of convenience stores in the United States. The stores are partly automated, with customers able to purchase products without being checked out by a cashier or using a self-checkout station.
On the other side we see IKEA, a company who wasn’t leading the retail revolution for its online sales, but has always been very limited in their offline policy. Mega retail stores just outside of the city centers, big enough to serve a lot of customers and give them a real shopping experience.
Although IKEA was leading in integrating social media and internet in their marketing strategy, they were very late (2016) in implementing an online strategy. This comes after IKEA realized that it was losing market to smaller market entrants who used eCommerce to sell directly to consumers. Apart from utilizing its online website marketplace, IKEA is juggling the idea of diversifying and selling its products through other online avenues such as Amazon.
It seems easy, just combine the two models. But these transitions take time and specialized knowledge. Operating an online store is completely different as operating offline stores. Also, the level of investment is of a different type. Nevertheless, in the survival race this is the direction to go.
In summary, the future proof retailer will have a cross border operation which combines offline and online shopping. When the online model is dominating, the focus will be on convenience shopping, with broad assortments. In case of a dominating offline model, the focus will be on low cost (discount) or product/brand specialization.
Efficiency and cost saving will be achieved in the near future on the level of minimizing returns, offering premium transport services, and reduction of transport and storage cost by using drop shipments.