Amazon off the cards? Retailers must adapt to on-demand e-commerce solutions
The sheer demand for online delivery is unprecedented right now.
Even at the essential grocery stores like Walmart that remain open, queue systems, customer spacing limits and shorter opening hours mean your usual 20-minute shop could take more like 2 hours – and that’s if the stores can keep shelves stacked quick enough.
Instead, consumers are turning to what they now know and love: e-commerce. Of course, ramped up traffic is putting tremendous strain on supply chain and logistics systems that are already stretched to capacity. When even Amazon is struggling, we know we’re facing some pretty extraordinary circumstances.
Last month, the US-based retail giant announced to Reuters that it would stop all non-essential item deliveries in France and Italy. Amazon classifies baby products, health and household items, beauty and personal care products, and other industrial, scientific, and pet care entities as essentials.
The temporary move, in some of the worst-affected areas of Europe, it said, were due to a spike in orders and the need to protect teams at its fulfilment centers.
This had a huge knock-on effect on Amazon’s third-party sellers who rely on its well-oiled Fulfilled by Amazon (FAB) logistics network, who now must find new ways to get their goods to customers.
An IDC study from earlier this year found that 90 percent of smaller retailers see Amazon as a “selling channel”, “technology partner” or “business enabler”. But with shipping times extending, in some cases, from 24 hours to many weeks, these sellers are seeing high volumes of abandoned purchases. Even in a crisis, customers don’t expect to have to wait more than a few days for deliveries.
FAB closing off even temporarily, then, is a big deal, and undeniably bad news for small, independent ‘Amazon-only’ retailers.
On the other hand, it’s an opening for up-and-coming e-commerce, logistics, and warehousing solutions to make their mark with outlets who are in a corner, and ready to spend on getting their operations back up to speed.
For such startups, striking now could cement relationships in the longer term as retailers are forced to reevaluate their reliance on platforms such as Amazon and eBay.
Ciaran Bollard, CEO of Kooomo, said that many retailers are looking to adopt solutions that kick start a cycle of independent supply chain services in order to match the demand for their products, with more reliability.
“Retailers that have invested in omnichannel retail solutions and have stock in-store which is also available online is easing the impact of restricted footfall on the high-street.
“Some retailers are now considering resupplying the main warehouse with shop stock to help fulfil demand.
“There are many alternative stock distribution options to consider, with some replenishing warehouse stock using items couriered directly from their stores. When the time is right it can also be a good idea to introduce ‘click and collect’ options.”
While shifting strategies like this can help retailers manage demand in the shorter term, it will also allow them to better position themselves to leverage omnichannel selling strategies in the future – where customers get the same experience from a retailer however they choose to shop – once things have returned to some semblance of normality.
The on-demand supply chain
Further up the chain, on-demand fulfilment options could help many retailers navigate the current surge. Pop-up or temporary distribution centers can be set up easily at locations with soaring demand, bringing products closer to customers. These models could be tried and tested to better support temporary or seasonal spikes later on.
Alternatively, retailers can turn to freelance courier services such as TaskRabbit to fulfil shipping orders that are now backed up and delayed. The readily-available workforce enables a decentralized delivery method, whereby deliveries are delegated upon local labor across regions.
The next few months could also prove to be a boon for ‘on-demand’ warehousing firms, where retailers can acquire temporary spaces through short-term leases as compared to longer contracts with 3PLs (Third-party logistics).
One such firm, Flexe predicted that 20 to 30 percent of warehouse space was unused at any given time. Warehouse and retailers can use on-demand warehousing applications to make use of this surplus footprint to manage the current spike in demand for certain products, with flexible ‘pay as you use’ subscription models.
Enterprising retailers, realizing the risk attached to relying on one platform for sales and distribution, will quickly adapt and adopt the existing services and solutions on the market that can keep them selling and fulfilling orders to capitalize in an upsurge in demand.
Yes, these can be a solution for the short-term, but as the business disruption recedes, the relationships and experiences developed at this point could see retailers pivot away from tried-and-tested logistics giants in the months and years to come. That same chunk of change they gave to Amazon may be better spent among a new wave of smaller startups.
“Omnichannel innovations have been invaluable for many retailers and we can assume that as online purchasing increases, they will continue to explore their potential long after this is over,” said Bollard.
“Over in China, it is good to see Alibaba’s shipping activity has approached pre-outbreak levels as people resumed work and roadblocks came down this week.
“We can already see countries overcoming the worst of COVID-19, with China coming out of lockdown and gradually returning to normal. Hopefully this is a light at the end of the tunnel for retailers around the world.”