DC Velocity - November 2016

(See Exhibit 3.)

Retailers are investing in those tools because they expect e-commerce revenues will continue to rise, no matter where the fulfillment happens. As for where that fulfillment will take place, the situation appears to be in flux. Asked how they see e-commerce fulfillment locations changing over the next five years, 32 percent of respondents said they expected to see a rise in e-commerce orders fulfilled in traditional DCs, compared with 28 percent who expect to see more fulfillment taking place in stores and 19 percent who said Web-only DCs.

DELIVERING THE
GOODS

So that’s how the orders are sorted and picked, but how does the actual merchandise reach consumers’ doorsteps?

The omnichannel approach offers practitioners a dazzling array of options, from the latest high-tech drones to the do-it-yourself alternative: pick up in store.

We asked how retailers handled “last mile” deliveries and found that in practice, most retailers stuck with tried-and-true methods. The most common answer was courier delivery service (FedEx, UPS, etc.) at 43 percent, followed by a third-party logistics (3PL) partner at 23 percent, and arranging for items to be drop-shipped by partners at 20 percent. (See Exhibit 4.)

Some retailers are also experimenting with more creative alternatives, including deliveries made by store staff (via car, bicycle, foot, etc.) at 5 percent, drones at 2 percent, and crowdsourced delivery services (Deliv, Instacart, etc.) at

1 percent. And the future may hold even greater
change. When we asked which delivery methods
our respondents do not currently use but plan
to use, the top three replies were crowdsourced
delivery service with 8 percent, drop-shipped by
partners also with 8 percent, and 3PL delivery
partner at 7 percent.

Despite the rapid rise of omnichannel commerce, our survey revealed that e-commerce revenue has a long way to go before it passes sales from physical stores. When asked what percentage of their direct retail revenue currently came from each channel, respondents said 67 percent came from brick-and-mortar locations, 24 percent from online sites (including mobile), and 9 percent from call center and catalog sales. (See Exhibit 5.)

Overall, the survey indicated that omnichannel fulfillment remains in a state of flux. As retailers scramble to adjust to a shifting marketplace, they are experimenting with a wide variety of fulfillment practices and technologies. Stay tuned as DC VELOCITY continues to track the evolution of omnichannel fulfillment practices and shares the hard-won lessons of industry leaders.