How E-Commerce Is Changing Retail; Ways to Optimize Fulfillment
Q: With the pandemic causing a huge surge in e-commerce demand, how has this peak season compared to those in the past? How has Hub Group positioned itself to deliver?
A: We've seen a surge in e-commerce this year—both from an industry and from a company point of view.
In 2019, we saw around 5% of all CPG sales come from e-commerce. In 2020, we saw that increase to 7%, which is almost a 50% increase. Even if this is a relatively small percentage of total sales, it's receiving disproportionate attention as these growth rates will likely continue.
Although forecasts did not predict what we saw earlier in the year, we were able to leverage our vast network and retail providers to quickly modify solutions to manage through it. This really exemplifies the need to build that resilient, agile, and highly visible supply chain.
Q: What has been your assessment on retailers adjusting to the current climate?
A: We always see retailers adjusting to stay upfront and follow consumer demand, although this year it has accelerated. For example, in September of this past year, we saw Walmart rolled out some major changes to their OTIF (On-Time In Full) compliance program. Their new target is 98%, which is up from 87%.
Walmart also announced another initiative, SQEP (Supplier Quality Excellence Program). SQEP is positioned to increase quality and visibility into Walmart's supply chain. This is something that Hub Group CaseStack Retail Supplier Solutions really focuses on and what we've been doing for almost 20 years now.
Q: What do you predict for supply chains across the country in 2021 and how can retailers thrive in the e-commerce boom?
A: I can start by pointing out what we discussed regarding stricter retailer compliance, like what we saw with Walmart and OTIF. I think these types of compliance programs for retailers will continue to be more challenging, but for good reason.
Precision is necessary to execute an omnichannel strategy. I think that retailers that continue to work with companies like ours, enable their vendors—especially the small to medium-sized ones—to compete on a level playing field with the larger companies.
I predict we'll see more marketplaces or at least more market penetration for those that are already active. These marketplaces can be similar to what we're already seeing with the Amazon Seller Central model. This shifts the responsibility of storing and stocking inventory and fulfillment to the seller. So I think both retailers and suppliers will adopt more marketplaces and direct-to-consumer models in the coming year.