In this article and resulting white paper, we look at the challenges giving rise to the hyperlocal fulfillment trend, and why they must be addressed; we explain how hyperlocal fulfillment also known as micro-fulfillment works, look at the logistics implications and detail the benefits as well as some of the risks.
What is Hyperlocal Fulfillment?
Inner-city congestion and rising delivery costs. Increasing demand for instant fulfillment. Skyrocketing prices for conventional distribution center real estate.
The Rise of Ecommerce
The four horsemen of the retail apocalypse have come together to give logistics managers a real nightmare.
How do you fulfill customer orders in this environment while still maintaining an acceptable profit margin?
Here’s a hint. You don’t always do it by continuing distribution operations out of remote, gigantic DCs.
Over the past couple of years, logistics managers desperate to conquer the last-mile challenge have been trying out a new model that turns the old fulfillment model on its head.
Hyperlocal fulfillment is the concept that is emerging as a remedy to the challenges that are making order fulfillment increasingly difficult.
It relies on small, numerous fulfillment centers, located in urban areas – either right downtown or close to the core – to stock and ship out goods for e-commerce orders.
By bringing the product closer to the customer, then creating and dispatching orders, those orders can be fulfilled faster, on a smaller footprint and can employ innovative final mile delivery solutions.
Each taken separately, the challenges presented by burgeoning e-commerce, high real estate prices, the demand for faster fulfillment and the increasing costs of delivery thanks to urban congestion are bad enough. However, for a business that is trying to quickly fulfill and deliver orders in the city, together these four present a formidable barrier to profit. Here is a look at the scope of each challenge.
Increasing Ecommerce Sales
We have talked about the rise of e-commerce before. It is widely recognized as this century’s greatest disruptor of supply chain operations; and although the percentage of retail sales completed by e-commerce remains quite low – at about 10 percent – in the U.S. that amounted to $137.7 billion for the first quarter of 2019 alone. Its market share is steadily climbing. Looking back to 2009, e-commerce sales only amounted to less than four percent of the retail total.
This increase in e-commerce is having a painful impact on bricks and mortar stores, especially in apparel and other product categories that can be easily delivered digitally – books, music, and games, for example. E-commerce’s share of the retail pie in the general merchandise, apparel and accessories, furniture and other category (in other words, general merchandise retailers; furniture and home furnishings; electronics and appliances; clothing and accessories; sporting goods, hobby, book, and music; and, office supplies, stationery, and gift stores) reached 28 percent in the first quarter of 2018.
What this means is the department stores – which sell all that general merchandise – are having to rethink their strategy, resulting in the closure of retail spaces. In 2018 U.S. retailers shuttered 5,864 retail locations, and as of April 2019, the number had already reached 5,994.
While this is bad news for those retailers and many of their employees, it is freeing up inner-city retail real estate. Read more here
By: By Greg Braun; September 26, 2019