The world of retail has permanently changed. We are seeing an entirely different market than before the pandemic. We’ve seen global changes that transformed ecommerce – perhaps forever. Thanks to continued supply chain issues, the scaling of fulfillment services, an ongoing labor shortage, and new players in the sector, it’s a challenging time for ecommerce. That being said, it’s also an exciting time. Here are the trends that have shaped the past two years – and will continue to impact ecommerce well into the next one.
- Subscription-based business models are here to stay. Subscription offerings existed prior to the pandemic, but they really ramped up during Covid. As people became increasingly reliant on home deliveries, more organizations began to develop subscription offerings. According to a study from Recharge Payments, in 2020 there was a 90% increase in subscription programs relative to the year prior. As physical retail has reopened, there’s been a lull in the growth of subscription offerings. However, research shows that many people who had begun subscription services during the pandemic plan to continue, and curated subscription services for specialty products are a powerful growth driver. Adding a subscription model might make sense for your ecommerce offerings, but carefully consider the implications for complete fulfillment.
- Brand leaders are showing more interest in direct-to-consumer fulfillment. The latest figures show that 2022 experienced a 15% increase in direct-to-consumer ecommerce over 2021. While once only really offered from disruptive, online-only brands, more traditional retailers have started to look closely at direct selling. Some of this activity is driven by the fact that many warehouses experienced challenges during recent supply chain disruption. Centralizing distribution and fulfillment can help more established brands to increase visibility and manage unreliable foot traffic. Companies such as Nike, Under Armor, and Levis have recently enhanced their DC capabilities. For example, whereas direct-to-consumer once made up just 15% of Nike’s revenue, that number grew to 35% in 2020 and is expected to continue to increase.
- Consumers now expect hybrid fulfillment. There was a time when services like curbside pick-up or BOPIS (Buy online, pick up in store) were rare – and those days are over. These options became more commonplace during the pandemic and now consumers have come to depend on them. You can expect that a large percentage of people who used hybrid fulfillment during the pandemic will continue to do so, either out of habit or because they enjoy the convenience. To a larger degree, this trend is representative of the fact that shopping journeys need to be customer-centric. In an omni-channel landscape, it’s important to meet your audience wherever they are and offer shopping in the channels they choose.
- Demand for automation continues to increase. Whether businesses embrace warehouse management systems (WMS), return management software, or robots on the warehouse floor, the demand for automated options has steadily risen. Research shows that the global warehouse automation market is expected to hit $30 billion by 2026. Several forms of automation can alleviate stress from continued labor shortages and complex supply chains. At the same time, manual processes can end up costing organizations who are pursuing greater efficiency. However, relatively small companies should complete careful calculations on how likely they are to achieve economies of scale throughout the year. For some businesses, the upfront investments required in more automated tools or processes may not pay off.
- Customers pay attention to premium shipping experiences. The “Amazon effect” has created customers that expect deliveries almost immediately – in a day or two at most. Not only that, people now want to be surprised and delighted by their delivery experience, and they want real-time updates on their shipments. Research shows that the average US consumer tracks their package 3.9 times after purchasing. But how many retailers make that possible through easily accessible tracking information? Integrated, real-time shipping experiences are critical to creating customer confidence and demonstrating reliability. Same day or two day shipping is increasingly important, and may even end up being table-stakes in some sectors.
- Take time to focus on omni-channel selling. Integrating multiple sales channels makes it easier for consumers to shop for and purchase products across separate channels or mediums. Consider the difference in experience between shopping on a mobile device and walking into a physical store. Organizations that enable omni-channel selling and offer cross-channeling for purchases are more likely to influence consumers to buy things online.
- With more online purchases come more returns. For this reason, we’ve seen an increase in returns management that should continue. Savvy companies are expanding their return management processes. Along with the traditional phases, the collection, organization, and restocking of returned purchases now needs to be considered. A fulfillment management system that allows warehouse workers to deal with both deliveries and returns will make things run a lot smoother. This is another area where a 3PL can streamline the process and keep things running quickly behind the scenes.
- Product bundling creates more options. This term refers to a tactic in which several products are grouped together and sold as a unit for one price. In this way, retailers can encourage customers to buy additional items and more quickly restock their own warehouse. Bundling allows retailers to do more using simply existing stock. Generally speaking, product bundling increases average order value, while decreasing marketing and distribution costs. Additionally, by packaging items, you only need one warehouse bin for storage, and you can ship less items to save on shipping. Plus, product bundling offers a way to unload merchandise that hasn’t been sold yet. For all of these reasons, more retailers have been employing this strategy and we don’t expect that to change.
- A larger supplier base improves delivery rates. At one time companies relied on suppliers within their region, but it’s gotten easier than ever to work with businesses overseas. That means brands can explore different options, and find choices that make delivery to certain areas more attainable. Most important of all, being able to choose from various suppliers means that companies can work with multiple vendors, offering them contingency plans that create supply chain resiliency.
Retailers and customers alike are adjusting to a “new normal”. While these adjustments can be challenging, they also offer opportunities for new growth. These are the trends that you’ve likely noticed over the past year or two, and they aren’t slowing down. These trends represent realities that will likely impact your supply chain in 2023 and beyond. Are you prepared to make the most of them? Taylored Services can help. We offer robust logistics and fulfillment services that will help you to turn your supply chain operation into a growth driver.