Sanchoy Das, professor in the Engineering Department of the New Jersey Institute of Technology, explains how “fast fulfillment” has come to dominate e-commerce, to the point where online shoppers expect nothing less.
The interval between when the online consumer hits the “order” button and the product is delivered is shrinking rapidly. What used to be an experience of several days is now a next-day proposition, and increasingly buyers are expecting one-day or even same-day service.
Das is the author of Fast Fulfillment: The Machine That Changed Retailing. It lays out the dilemma facing retailers and e-tailers who don’t happen to be Amazon.com. The latter, he says, has created a “machine,” consisting of a huge network of distribution centers and accompanying technology designed specifically for speed.
Smaller merchandisers can’t hope to compete with a network of their own; they’re better off relying on the Fulfillment by Amazon service, which leverages the giant e-tailer’s capabilities. But larger retailers are stepping up to match the Amazon model, Das says. To do that, they need to attract people who understand the requirements of fast fulfillment, both in terms of business process and technology.
They also need capital. “This is not cheap,” says Das. Not even Amazon is recovering the full cost of its fulfillment network through Prime membership. Das estimates that it’s spending around 10% of gross merchandise value on fulfillment. In addition, retailers’
fast-fulfillment operations need sophisticated algorithms and I.T. capability, not to mention physical warehouses and distribution centers, in order to meet customer expectations. They must also adjust to the changing requirements for warehouses today — the need for facilities that range in size and capability, from million-square-foot DCs to micro-fulfillment centers nestled within retail stores.
Retailers should expect no relief from these requirements in future. “Speed is going to be the key thing,” says Das.
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