Retail technology trade show NRF reinforced how vital it is for retailers to get their fulfilment offering right in the future.
A recurring theme at this year’s NRF retail technology conference was the need for retailers to up their fulfilment game. Order fulfilment on the whole is not done well by retailers in the eyes of consumers, and it is one of the biggest barriers of success.
Consumer expectations in this area have grown hugely in the past five years largely owing to the dominance and success of Amazon.
In 2015, 51% of all ecommerce growth in the US went to Amazon, so improvements in fulfilment are not just a nice to have for retailers, they’re a necessity to survive. For Amazon, 12% of revenue is on fulfilment costs.
Predictions from NRF said companies that adapt to more modern way of doing commerce, that enable multi warehouse distribution, will grow at about 20% and profit margins will grow at about 10%. This is applicable to large and small brands, highlighting the growth potential from making improvements in this area.
We are already seeing this focus on improving fulfilment play out in the UK market in Sainsbury’s interest in Home Retail Group.
Earlier this year, Sainsbury’s revealed it has agreed terms for a £1.3bn acquisition of Home Retail Group. When discussing the takeover bid, Sainsbury’s boss Mike Coupe declared the grocer can compete with John Lewis, Amazon and Marks & Spencer, if it completes a takeover of Argos.
Coupe said the takeover would “accelerate” the grocer’s multichannel strategy and “set Sainsbury’s up for the medium to long term”.
He said that the combined Sainsbury’s and Argos business would boast 2,000 stores, 100,000 non-food products and a “world-leading” distribution network, which would allow it to go toe-to-toe with the biggest players in the market.
He added: “The portfolio of products is around 100,000 – 50,000 from each company – trading through 2,000 shops and through what we believe to be an industry-leading, if not world-leading network to satisfy deliveries to home and click-and-collect.”
His statement shows the importance the grocer places on creating a world leading distribution network to compete successfully in the future.
If retailers don’t make drastic improvements to their fulfilment options in 2016, those getting it right such as Amazon will continue to grow, win market share and out-compete their rivals, leaving other retailers in their wake.