Mark Thornton, marketing director of Maginus Software, thinks that going toe-to-toe with Amazon could put many multi-channel retailers on a hiding to nothing. Unless, that is, they start to think smart, think strategically, and think of a number.
Amazon has once again raised the bar on fulfilment by bringing its Prime Now one-hour delivery service to London. With many retailers – particularly those with a multi-channel operation – struggling to manage even same-day delivery, this probably feels like a kick in the teeth.
But while fighting the e-tail giant alone can feel like a powerless struggle, there is a new way for retailers to take on the mighty Amazon, and it involves strength in numbers. I’m talking about a Strategic Delivery Alliance (SDA); two or more like-minded retailers working together in collaboration with a third party logistics company (3PL) and warehouse management organisations, supplemented by innovative delivery agencies.
What are the challenges of operating an SDA?
Getting stock to customers as quickly as possible means minimising the distance between products and customers – and this starts way back down the supply chain. Retailers can only promise items to shoppers within a certain time frame if they have an accurate view of where it lies, and this means having an accurate overview of stock location and availability in all channels.
The next challenge is where to allocate this stock from; under our vision of an SDA, retailers would fulfil from a central warehouse as standard, in line with current fulfilment processes, but then send goods either to stores or to dedicated satellite ‘hubs’, from which last mile delivery to the customer can be enacted.
How can SDAs reduce fulfilment costs?
Of course, creating or extending satellite locations has an attached cost, but partnering with supply chain experts with storage facilities and carrier management capabilities as part of an SDA can spread the cost – and avoids eroding margin or passing the increased operating fees onto the customer.
Another option is to set up managed lockers as a satellite fulfilment location, a technique that Amazon is already using in conjunction with many supermarkets and convenience stores. This may be too expensive to roll out as a solo project, but sharing these lockers between multiple retailers, operated through a 3PL, can achieve the same economy of scale as a single, larger retailer.
The same sharing strategy can be applied to click and collect orders where ‘like-minded’ businesses are located in close proximity. With an SDA, if these retailers share a 3PL, the delivery cost is split multiple ways as they’re travelling to the same location to fulfil store orders.
This philosophy can also be rolled out to click and collect and Collect+ points, where capacity is limited; if shop A runs out of space to store parcels, the retailer’s ecommerce platform can automatically refer the customer to nearby shop B, to collect their goods from there instead. And with a common 3PL, the cost of fulfilment is no more than if all stock was going to shop A.
These are just a few examples of the way in which Strategic Delivery Alliances can streamline operations cost-effectively, and they all rely on one thing: smaller retailers working together, to create a combined delivery network of the same strength as major international organisations.
To find out more about Strategic Delivery Alliances, download Maginus’ report: how can high street retailers compete with Amazon?