DC Velocity - January 2019

BY BRIAN GIBSON, CLIFF DEFEE, RAFAY ISHFAQ, AND BETH DAVIS-SRAMEK

OMNICHANNEL COMMERCE Strategy

THERE IS NO DOUB T THA T OMNICHANNEL RETAILing is having a significant impact on how retailers fulfill and deliver customer orders. With 2018 U.S. e-commerce sales projected to eclipse $526 billion, consumers are increasingly demanding that they be able to place orders through any channel they like and that they be able to receive them when and where they want.

At the same time that retailers are grappling with this revolution, they are facing a key demographic change that is significantly complicating order delivery and fulfillment: the growth in urban population. Following decades of population migration to the suburbs, there is a shift back to urban areas. Between 2010 and 2015, the core cities of the 33 largest metro areas in the United States added 1. 52 educated millennials for each one added to their surrounding suburbs. 1

These urban markets provide fertile prospects for omnichannel retailing. With limited household storage capacity, parking for vehicles, or shopping time, newer city dwellers are prime candidates for rapid omnichannel fulfillment. When these newer customers are coupled with long-time city residents who lack personal transportation and shopping options, retailers have a significant demand growth opportunity.

Fulfilling small-volume, high-frequency, rapid-velocity omnichannel orders in a highly congested urban setting, however, adds complications to the already challenging task of suburban and rural omnichannel order fulfillment. Rising real estate costs make it impractical to establish high-capacity urban fulfillment centers that can provide efficient access to a wide inventory assortment. Vehicle parking challenges and proposed restrictions on delivery times in urban core areas can limit the ability to support consistent same-day delivery. And, serving customers in high-rise

More and more people—especially young people—are moving into cities. To reach this increasingly important market segment, retailers need to find a profitable and efficient way to do urban fulfillment.

URBAN FULFILLMENT:

The battle for city shoppers

This story first appeared in the Quarter 4/2018 edition of CSCMP’s Supply Chain Quarterly, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media’s DC VELOCITY. Readers can obtain a subscription by joining the Council of Supply Chain Management Professionals (whose membership dues include The Quarterly’s subscription fee). Subscriptions are also available to nonmembers for $34.95 (digital) or $89 a year (print). For more information, visit www. SupplyChainQuarterly.com.