UK retailers can be forgiven for sleepless nights and knee-jerk reactions. In the UK, more than 2,500 high street retail outlets – about 14 a day – closed their doors in the first half of 2017, according to reports. High street sales are at their weakest point since the Great Recession of 2008, and while the losses were somewhat offset by new store openings, retailers continue in uncertainty as consumer shopping continues to move online.
The pressure on retailers to provide consistent experiences and competitive pricing all while protecting their margins and serving a customer who increasingly shops outside of the store, is at an all time high.
But it is important to understand we are talking about change here, not catastrophe. Just because stores are struggling doesn’t mean consumers have stopped shopping. In fact, retail sales grew about 4%. Much of that comes from e-commerce, which grew an astonishing 14% in 2017.
That shift has many in retail, fashion and consumer products focusing on business models that get their products directly to consumers faster, cheaper, and more efficiently than ever before.
The net effect has been an increased, almost myopic focus on last mile delivery. And we’ve seen lots of ideas for how to solve it – autonomous vehicles, drones, subscription services, and even Uber, to name a few. All out of recognition that consumers are mobile, have high expectations, and don’t always buy from stores. Fast-changing consumer habits have put businesses under intense pressure to solve for the last mile. But if they don’t get the rest of their supply chain in order first, 2018 could be a logistics nightmare.
Here’s where it gets tricky. These novel delivery methods cost money, and unless you’re Amazon and have millions of paying Prime members, you’ll have to offset the cost of last mile delivery somewhere else in the supply chain. And even trickier, if the products are not positioned in places you can ship from, it doesn’t matter how good your last mile capabilities are.
Retailers would do well to remember that the last mile is only about 5% of the total supply chain. If they are to survive these changes, now is the time to focus on making sure the other 95% is up to the task. That means enhancing connectivity and visibility across the global supply network, streamlining the procure-to-pay process, and making sure every aspect of the supply chain, from stores and warehouses all the way upstream to carriers and factories are aligned to provide end consumers the best delivery experiences possible.