Thursday, March 15, 2018

The future of commerce is about speed

The future of commerce is about speed As Amazon pushes for delivery speed, major retailers face pressure to match the e-Commerce giant. Retailers are requiring highly sophisticated logistic and inventory management strategy to be competitive. For eCommerce business, one of the major cost is the expenses for returning the merchandise. So to reduce this return-shipping cost,  Prologis Inc. is building a multistory building warehouse in the downtown Seattle instead of building it in outskirt of the city. In doing so, they hope to provide better experience in products deliver to win more business while cutting the cost of shipping cost of returned merchandise.

I guess one of the biggest factor in this strategy is to make sure the cost is kept down. It's another story where technologies will be a key element to make this strategy works. I can speculate that a whole school of technologies will be deployed:

  • Building technologies : letting trucks to drive up to second floor to load and unload merchandise means that the building can go up and not sideway to cut land cost low.
  • Robotic technologies that replace workers to pick up, store and retrieve merchandise from the truck to the delivery drop box is critical.
  • Advance automobile technology: automated trucks to drones will be used.
  • Sourcing strategies coordinating suppliers to standardise packaging so that the merchandise can be stored and retrieved directly, perhaps.
Now having said all those, there is nothing to stop any company to deploy the same set of technologies even in a warehouse in outskirt of the city. Assuming two companies deploy the same warehouse and manage the operation with similar efficiency, it means the difference between the two operation will be:
  • Extra revenue from customers who buy because of faster delivery
  • Savings in sourcing due to larger scale of sourcing from the extra business they are getting
  • Savings in promotion cost due to more repeat customer purchase
  • Savings in brand building cost as the high delivery speed will generate more referral business
  • Savings of delivery and return shipment
  • Land cost

From a strategic competition perspective, it sounds like something that one has to achieve despite of all these complex calculation. The more mass the retailer is, the more so it is to achieve this high delivery speed because only the niche products can afford to have customer to wait for the extra time.

It's a highly advance and ultra competitive new world. Small retailers will be facing much hard time!