The year 2020 was unlike any other in recent memory. While the discovery and rollout of COVID-19 vaccines are all welcome news, the after-effects of the pandemic will remain with us and continue to shape our trends and policies for years to come.
COVID-19 is only the latest of the trendsetters in retail logistics. Other trend-setters that are increasingly pushing the envelope include ever-increasing customer expectations and growing consumer sensitivity to corporate sustainability and social responsibility actions.
In this article, we explore five trends we believe will dominate retail logistics in 2021 and perhaps well beyond. Review these trends and why we think they will set the pace of retail logistics in 2021 and explore some example products or businesses that have already embraced them.
Competition from online retailers has forced many brick-and-mortar retailers to open up e-commerce stores or social media ones, or both1. They would usually treat their online orders separately from their in-store ones. As a result, customers cannot return online orders in-store or vice versa. This mode of operating multiple retail channels is known as multichannel fulfillment. This separation goes even deeper: the retailer’s catalog for each channel is independent of the rest, and this shows up in differences in the pricing of the same item, giving customers a bad feeling about it all.
To resolve these issues, retailers that are further along in their online transformation often choose to integrate all their channels (in-store, e-commerce, social) to provide a seamless customer experience. Behind the scenes, firms have had to adjust their logistics and supply chain processes to unify order fulfillment into a single back-office channel. Operating multiple channels in this way is called omnichannel fulfillment. Thus, in omnichannel retail, the differentiation into channels is only skin-deep.
The trend for retailers to open more and more online channels complicates multichannel fulfillment, as it robs them of the advantages of the economy of scale. The reason for that is that multichannel retailing silos up each channel as though it were a different business. The COVID-19 pandemic has dramatically accelerated the trend to go omnichannel2, as retailers that previously dragged their feet found themselves left behind and had to hurry along. We see no sign of the trend towards omnichannel fulfillment letting up anytime soon.
The logistics for omnichannel fulfillment is hard to manage without the right technology platform3. The fulfillment cost is dominated by the last mile4, as retailers can choose to ship from the nearest store, warehouse, or distribution center (DC). Recent omnichannel success stories5 include Nordstrom, Target, Home Depot, Staples, and Walmart.
Sustainable Retail Logistics
Reducing the financial, environmental, and social costs of retail logistics is an ongoing trend. We expect this trend to continue to accelerate in 2021 for several reasons. It is in the interest of logistics companies to keep their overheads (financial costs) low, which boosts their margin. Any dollar saved by reducing inefficiencies (tighter packing, optimized routing, horizontal collaboration, and automation) is a dollar added to logistics firms’ shrinking margins6.
The Global Logistics Emissions Council, Green Logistics, and EcoTransit World are examples of initiatives that have made it easier to assess environmental costs better. Fortunately, reducing the ecological impact of logistics does not always conflict with growing margins in retail logistics. Many of the measures to lower greenhouse gas and carbon emissions, reduce land use, increase energy efficiency, and consume and generate fewer pollutants also lead to lower financial costs. These measures also work wonders for a company’s reputation, brand loyalty and employee engagement. No wonder many logistics companies have announced seemingly bold emission targets such as DHL’s zero-emission logistics by 2050 and Amazon’s Climate Pledge.
However, assessing social costs is still a struggle. Better traceability tools using blockchain technologies are a good start but not sufficient. However, some cost-cutting measures (e.g., automation) may be at odds with reducing social costs. Automation often takes away the livelihoods of some segment of society. Unless organizations contribute to retraining impacted communities or governments intervene to smoothen the transition of people affected by such disruptive cost-cutting measures, the social costs in terms of lost livelihoods might rise.
Before the Coronavirus pandemic, cost-cutting measures and labor shortages have driven warehouse automation through various automated guided vehicles (AGVs) designed for picking, pallet handling, loading, etc. Since the pandemic, however, the primary motivation has been the safety of employees and their families.
The last mile fulfillment is notoriously the least efficient of the entire supply chain, accounting for 41% of the total supply chain cost7. It is no wonder that many companies are experimenting with self-driving technologies for the last mile. These technologies include driverless delivery vehicles, delivery drones, autonomous taxis, and autonomous trucks.
Some municipalities have started issuing licenses to companies to test these autonomous vehicles. For instance, the Robotics start-up Nuro has been granted a two-year autonomous vehicle exemption to deploy up to 5000 of its driverless delivery vehicles by the NHTSA8–10. The regulations around self-driving technologies are still evolving11. Public acceptance is still somewhat cautious.
The pandemic is also going to accelerate investment in driverless freight trucks. The regulations around autonomous trucking are likely to be an easier pill to swallow for regulators since trucks tend to travel primarily on highways and city outskirts, making the likelihood of accidents involving humans unlikely12.
Unattended stores13, such as Amazon Go in the US and BingoBox in China, will likely become trendy again because of the pandemic14.
Supply Chain Traceability
Retailers are under pressure from governments, NGOs, and consumers to share more information about the products they sell15. Unfortunately, traditional supply chains are ill-equipped to track such data efficiently. For example, end-to-end tracking of a mango carton takes Walmart about seven days in the conventional supply chain. This number dropped to 2.2 seconds when they deployed a blockchain traceability solution16.
Blockchain is a revolutionary innovation. Satoshi Nakamori, the shadowy inventor of Bitcoin, designed it as Bitcoin’s underlying infrastructure in 200817. Its applications18 have since gone far beyond digital currencies and financial assets. They now include social (digital identity, voting, responsible sourcing19,20), legal (smart contracts and smart property), services (parking and rental), and logistics applications (asset tracking).
Asset tracking21 traces an item’s journey as it transforms from raw materials to a product on a store shelf and undergoes several ownership changes in the process. Its journey continues as it undergoes consumption in the hands of one or more consumers. Finally, it makes its way through our waste management and recycling systems (reverse logistics journey). The blockchain, as well as cloud computing, can both be used to solve this problem. However, the advantages of blockchain over cloud computing include better transparency, decentralization, and immutability.
Because of the potential for substantial cost savings, especially in cases involving product recall, improved consumer loyalty to the brand, and even better employee satisfaction, we see no end to innovations and alliances in this space.
Shorter Delivery Times
The final trend for this year’s retail logistics, which we see no signs of slowing down, is the ever-shrinking delivery times that customers have come to expect from retailers. This is sometimes called the Amazon effect, following Amazon’s announcement of Amazon Prime, which includes unlimited two-day shipping in February 200522. Amazon has since followed up with free One-Day, Same-Day23, and 2-hour delivery options for its Prime members. Other retailers have been playing catch up23,24. Some of them have also launched in-store pickup options.
The ability to make good on these promises hinges on highly optimized logistics, especially the last mile. The shorter the promise, the costlier the logistics. It turns out many of the changes needed to meet the demands of shorter delivery times overlap substantially with those needed for omnichannel fulfillment25. Same-day delivery is particularly challenging, particularly for smaller retailers26 that do not have Amazon’s volume. Besides, it does raise serious questions about its ecological footprint27.
COVID-19 exposed the fragility of these promises when supply chains are global. Some retailers are exploring local sourcing and just-in-case inventory28, as risk mitigation strategies.
Are you struggling to make sense of the uncertainties recent events have brought along? Confused on how to turn these uncertainties into opportunities? Or just eager to adapt to the retail logistics trends that you may face this year? Our consultants at Symphony RetailAI have got your back. Reach out to our retail experts and we shall be happy to help. Symphony RetailAI has more than 30 years of innovation experience in retail logistics and AI. We also have a varied and expansive partner ecosystem, and over 1,200 happy customers in 70 countries.
- Taylor, D., Brockhaus, S., Knemeyer, A. M. & Murphy, P. Omnichannel fulfillment strategies: defining the concept and building an agenda for future inquiry. The International Journal of Logistics Management 30, 863–891 (2019).
- Briedis, H., Kronschnabl, A., Rodriguez, A. & Ungerman, K. Adapting to the next normal in retail: The customer experience imperative. (2020).
- Patty McDonald, S. C. Breaking the Cycle of Supply-Chain Technology Debt. https://www.supplychainbrain.com/blogs/1-think-tank/post/30645-breaking-the-cycle-of-supply-chain-technology-debt.
- Last-mile package delivery in 2030. https://www.mckinsey.com/industries/travel-logistics-and-transport-infrastructure/our-insights/last-mile-package-delivery-in-2030 (2019).
- Connected Retail Report: In-depth analysis of retailers shining through the pandemic. https://ciandt.com/us/en-us/connectedretailexperience.
- Cruijssen, F. Cross-Chain Collaboration in Logistics: Looking Back and Ahead. (Springer Nature, 2020).
- Jacobs, K. et al. The last-mile delivery challenge. Capgemini Research Institute (2019).
- Media, N. NHTSA grants Nuro exemption petition for low-speed driverless vehicle. https://www.nhtsa.gov/press-releases/nuro-exemption-low-speed-driverless-vehicle (2020).
- Guzman, J. Driverless delivery vehicle gets federal approval. https://thehill.com/changing-america/sustainability/infrastructure/482091-driverless-delivery-vehicle-gets-federal (2020).
- BBC News. Nuro set to be California’s first driverless delivery service. BBC (2020).
- Wiggers, K. Autonomous delivery companies stress need for clearer rules on deployment. VentureBeat https://venturebeat.com/2020/05/22/autonomous-delivery-companies-stress-need-for-clearer-rules-on-deployment/ (2020).
- Kilcarr, S. Driverless trucks: Where they’ll work, where they won’t. https://www.fleetowner.com/technology/article/21694527/driverless-trucks-where-theyll-work-where-they-wont (2016).
- Adamovich, K. The shopping of the future: 9 unmanned stores. https://payspacemagazine.com/retail/the-shopping-of-the-future-8-unmanned-stores-2/ (2020).
- Tone, S. Pandemic Gives China’s Unmanned Shops New Lease on Life. https://www.sixthtone.com/news/1005299/pandemic-gives-chinas-unmanned-shops-new-lease-on-life.
- What Supply Chain Transparency Really Means. Harvard Business Review (2019).
- Yiannas, F. A New Era of Food Transparency Powered by Blockchain. Innovations: Technology, Governance, Globalization 12, 46–56 (2018).
- Nakamoto, S. Bitcoin: A peer-to-peer electronic cash system. (2008).
- 25 blockchain applications & real-world use cases disrupting the status quo. https://builtin.com/blockchain/blockchain-applications.
- Theron, C. Modern slavery and transparency in supply chains: the role of business. The Modern Slavery Agenda 187–218 (2019) doi:10.1332/policypress/9781447346791.003.0009.
- Newton, A. Preventing modern slavery in corporate supply chains. The Business of Human Rights 73–78 (2019) doi:10.4324/9781351131193-9.
- Smith, E. Top 5 companies with fool-proof asset tracking solution on blockchain. The Capital https://medium.com/the-capital/top-5-companies-with-fool-proof-asset-tracking-solution-on-blockchain-94b147c71d1a (2019).
- Amazon Prime: A Timeline from 2005 to 2020. https://pattern.com/blog/amazon-prime-a-timeline-from-2005-to-2020/.
- Ecker, T., Hans, M., Neuhaus, F. & Spielvogel, J. Same-day delivery: Ready for takeoff. https://www.mckinsey.com/industries/retail/our-insights/same-day-delivery-ready-for-takeoff (2020).
- Free Shipping. https://www.walmart.com/cp/free-shipping/1088989.
- Lowe, J., Khan, A. A. & Bhatale, B. Same-day delivery: Surviving and thriving in a world where instant gratification rules. Whitepaper Cognizant 20–20 (2014).
- How consumer hunger for two-day delivery impacts small businesses. https://clutch.co/logistics/resources/how-two-day-delivery-impacts-small-businesses.
- Lin, J., Zhou, W. & Du, L. Is on-demand same day package delivery service green? Transp. Res. Part D: Trans. Environ. 61, 118–139 (2018).
- Roshan Gya, E. al. Fast forward – Rethinking Supply Chain Resilience for a Post-COVID-19 World. https://www.capgemini.com/wp-content/uploads/2020/11/Fast-forward_Report.pdf (2020).