Andrew Lockhart, vice president of business development with TGW Systems, describes how and why the retail landscape is changing — and what retailers can expect in the years to come.
SCB: What’s been going on in the world of retail in the last few years that makes today so different from the past?
Lockhart: It used to take three weeks to get an e-commerce order. Now it’s a week to two days, and we’re seeing a drive toward one-day and even same-day delivery. That changes the dynamic in terms of how orders are fulfilled, to get them to consumers within that time frame.
SCB: Is it because customers demand this type of service, or that the service is first offered and they come to expect it?
Lockhart: It is sort of a chicken-and-egg situation. But you've got Amazon laying the eggs, in the sense that it was the first to drive two-day delivery for free. Now it’s moving to one-day and same-day. That sets up an expectation with the public, which then asks, “Why don't I get this from every other retailer I shop with?" Amazon has been the-game changer in the market, and now consumers are expecting that from all retailers.
SCB: Also, the margin of error in service has been shrinking. In the past, if you made a mistake, it was correctable without the consequences that you're facing today.
Lockhart: Think about the retail store model. If I sent too many large T-shirts, I had five extra shirts on the rack, so it was no big deal. They got sold or returned at the end of the season. But if I send you the wrong T-shirt, you might not buy from me anymore. Or I have to pay for the return and send you a new one. So my costs go up for that one T-shirt, and you're probably not very happy with the service you got.
SCB: And the customer will plaster their unhappiness all over social media, creating a much greater effect than simply losing that one buyer.
Lockhart: People have a much bigger tendency to complain on social media than to say they got great service. That’s why most retailers these days have a social media department that tries to deal with all that stuff.
SCB: What are the challenges on the labor side that are making it difficult for retailers to meet these demands?
Lockhart: [Up until very recently], unemployment rates have been historically low. The other issue is workers saying, "Do I want to do that job five days a week?" There’s a generational shift, with millennials having a different view of working. So A, can I get the labor, and B, will they turn up?
SCB: The obvious alternative is automation. Can’t we just replace all the people with robots?
Lockhart: Automation helps you to reduce your labor risk, but it doesn’t do everything. Robots can't pick every single item. Maybe part of your order is done by robot, and part done by a person. There are all sorts of aspects to it that you need to look at. I don't believe that in the foreseeable future it's going to be totally automated — there will always be a need for robots and humans. The question is, what can be done by what?
SCB: How much more demanding is it going to get in years to come?
Lockhart: I believe the expectation for one-day or same-day delivery is already set. It’s going to become more and more the norm, and people are going to have to deal with it. Retailers have to meet the fulfillment challenge, whether that means putting more D.C.s closer to people and hubs, or improving service levels within existing D.C.s by the use of robotics and other methods. You’ve got to understand your data and your consumers much better than you did in the past. You’ve got to be open to change and make sure you're planning ahead, because none of this can be implemented overnight. You can't just be looking out 12 months.
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