I gave a panel presentation at the Bernstein “Motor of eCommerce” Supply Chain Conference last week in London.
We discussed two trends that will significantly impact eCommerce supply chain dynamics in the near term horizon.
1. Focus on Direct to Consumer
Brands and retailersacross many categories are accelerating their pace of selling directly to consumer (DTC). Many see DTC as a strategic pillar for not only driving incremental sales but also differentiated consumer engagement (see figure below).
In the past several years, Brands have focused more on the top-line and front-end aspects of enabling DTC. However, we believe that brands are rapidly pivoting to focus on bolstering their fulfillment and supply chain to enable full potential profitable growth. Fulfillment gaps and deficiencies in supply chain is costing companies 5-10 percentage points in EBIT. More importantly, supply chain shortcomings are preventing manufacturers and retailers from achieving their consumer promise strategics and objectives. Companies are beginning to realize that fulfillment is a strategic weapon in omnichannel.
2. Rising parcel costs
Labor shortages in the parcel market is rapidly becoming a structural headwind. While automation and self-driving technology promise to disrupt last mile cost economics, these are arguably at least a decade or more away. In addition, the increase in non-conveyable format products such as mattresses are also driving handling complexity in parcel operations. In the near term, imminent increase in parcel cost will have implications on retailers and brands. For example, parcel carriers like UPS, Fedex, etc. will likely raise prices to help mitigate structural cost headwinds. To counteract rising parcel costs, retailers and brands are actively exploring forward deploying inventory, store fulfillment and last mile crowdsourcing models.
Taken together, these two trends will play a significant role in shaping the overall eCommerce landscape in the next 3-5 years – with implications across end to end value chain – including 3PLs, technology providers, parcel and last mile carriers, and commercial real-estate developers.
View the full Bernstein eCommerce supply chain presentation here