Supporting high volumes requires brick-and-mortar locations to accommodate a range of distribution and fulfillment options.
Nearly a third of all digital retail transactions will be fulfilled by a physical bricks-and-mortar location, according to new research from Colliers, as more and more online orders become connected to stores. In 2020, just under 22% of digital sales were fulfilled by omnichannel methods.
“This continuity has compelled retailers to adapt their store operations to manage the influx,” a recent retail report released by the firm notes. “Supporting high volumes requires brick-and-mortar locations to accommodate a range of distribution and fulfillment options, prioritizing a dedicated space for packaging and shipping, in addition to having adequate staff to process and handle orders.”
That fulfillment could run the gamut from curbside pickup and in-store collection, both of which enjoyed a major boom during the pandemic, to direct shipment to consumers’ homes. Target has reported that sales through its drive-up service went up by a staggering 600% last year alone.
Despite the boom in omnichannel fulfillment, there are growing pains – at least from the consumer’s perspective. Colliers data shows that 43% of shoppers reported at least one issue using omnichannel services, “suggesting retailers need to further streamline this shopping experience,” the report notes.
And as omnichannel demand has boomed against the backdrop of a tightening labor market, many retailers are contemplating investments in machine learning and AI to address those concerns. According to McKinsey, using AI-enabled supply chain management allowed early adopters of that tech to improve logistics costs by 15%, inventory levels by 35%, and service levels by 65%.
“The pandemic provided retailers with a testing ground for automation technologies, determining their ability to manage distribution and warehouse fulfillment efficiently,” the Colliers report notes. “Despite initial fears, implementing automation is expected to create more new jobs than it replaces by 2025. This is good news for per diem employees, as it will require employers to retrain and upskill staff to ensure they are properly equipped for the future of work.”
Grocers are already betting big on automation, as evidenced by Albertsons’ partnership with Takeoff Technologies to create micro-fulfillment centers to specifically post online orders. Stop & Shop, Meijer and Target are all also following suit with plans to begin building their own MFCs to increase digital reach.
Such tools will be critical for grocery chains to meet still-burgeoning demand for online orders and deliveries quickly and efficiently, according to JLL.
“Micro-fulfillment centers (also known as MFCs) aren’t new, but they are a growing solution for many grocers,” the report notes. “MFCs provide flexibility as they are much smaller in size than a typical industrial-grade fulfillment center. They can be put into dark stores, adjacent to existing stores, or located centrally to multiple stores as a hub-and-spoke model.”