Fulfillment and Logistics Drive Retail Customer Loyalty

While the majority of retailers experienced fulfillment disruptions this past holiday season, retailers that provided alternative ways for customers to get their gifts on time, and later, return items with ease, stood out as innovative and reliable. Moving forward, fulfillment and logistics will increasingly become the battleground for customer loyalty even as business conditions normalize.

The Challenge

For retailers, the stakes are high as e-commerce accounted for a higher percentage of retail sales in 2020 than ever before. How this trend will end up normalizing is anybody’s guess, but businesses have been forced to pivot and retool their operations and supply chains to better align with new customer behaviors. Most have been able to quickly adapt their modes of taking customer orders, but it is the retailer’s ability to fulfill the order that customers most prize.

Speed, quality, and convenience of the fulfillment experience is increasingly what the customer values in terms of service and they expect it at a low cost.

Winners and Losers

Holiday orders exceeded shipping capacity by numbers previously unimaginable at a growth rate of 8% year over year. With overall online sales up 32% in 2020 as compared to 2019 as stated in the same report, the holiday season added pressure to an already strained network of fulfillment options and left customers nationwide disappointed by delayed gift arrivals.

Losing retailers were those that were overly reliant on the traditional last-mile delivery mechanisms such as FedEx, UPS, and USPS that had to meter freight to live within capacity constraints. Winners this past holiday season were those retailers that were able to guarantee on-time delivery later than competitors instead of forcing an early cut-off to ensure delivery in time for Christmas.

Moving forward, winners will be businesses that have innovated and learned to leverage their store networks, store associates, dark stores, pop-up warehouses, micro-fulfillment centers, and gig delivery platforms to consistently accomplish guaranteed, on-time last-mile delivery, all year round.

New Capabilities and Investment

Going forward retailers are going to need to invest in new technologies and operating capabilities to scale developing supply chain networks. Deploying technologies such as RAIN RFID will become important for providing the right level of end-to-end inventory visibility and delivery tracking to enable effective management of multi-echelon delivery networks.

Seamless SMS-powered, end-to-end communications networks will be required to provide the customer with full visibility to fulfillment as well as facilitating services such as curbside pick-up. More, retailers will need to rethink their KPIs to measure demand from a fulfillment perspective instead of from the point of sale.

This shift will be absolutely essential to ensure effective allocation of inventory to the right fulfillment points as well as enabling effective labor scheduling to fulfill orders.

Nimble retailers that innovate and raise their game in the fulfillment arena will continue to thrive and remain competitive into 2021 and beyond.