06 April 2021
Retailers are using imaginative ways to cope with a particularly disruptive market, says Christophe Pecoraro.
A COLOSSAL SHIFT to online shopping over the last year, coupled with increased demand born by Brexit, has signalled a capacity crunch across a variety of areas, including warehouse space.
As peak-like volumes continue online beyond the festive season, brands have no choice but to leverage alternative warehouse and fulfilment infrastructures to keep up in this digital age. PFS’ research found that to combat this ahead of the recent peak season, 27% of retailers invested in pop-up distribution/micro fulfilment. Like the concept of the pop-up shop, the pop-up distribution centre (DC) can be rapidly deployed, enabling brands to quickly set up and serve customers as required. Due to their adaptable nature, these space-on-demand warehousing methods can provide a flexible and cost-effective solution to online fulfilment.
In a market full of opportunity, the pop-up DC can also allow growing brands the flexibility to test the waters in new regions and approach new audiences without having to commit serious resource to a permanent facility. By doing so, brands can reduce initial capital outlay whilst getting their products closer to the customer.
By taking a lead from models such as the dark store, brands can leverage existing store space to act as micro-distribution centres. Dark stores are typically laid out like traditional stores but are inaccessible to the high street shopper. Instead, in-store pickers use the store to solely fulfil online orders, therefore acting as a small pop-up fulfilment hub.
While current store closures, with redundant stock, can accommodate this, a longer-term solution requires a hybrid approach. Moving forward, and as the high street reopens to the public, store spaces can offer the best of both worlds. Providing the much-missed in-store experience while using stock rooms combined with technology to deliver online goods through an omnichannel approach.
Ahead of Brexit, splitting inventory to base fulfilment in existing UK and European facilities was one of the top 3 fulfilment preparations being made by most retailers. Now, as the ramifications of Brexit continue to unfold, it is becoming increasingly apparent that brands with products distributed across multiple facilities, delivering to their customers in region, are best placed to overcome these headwinds.
Amid a last-minute scramble to prepare for Brexit, brands were also faced with the pressures of the recent peak season, which presented its own demand for additional warehouse capacity. According to PFS’ latest peak research, in a bid to keep up with surging sales, 32% of retailers invested in extra fulfilment capacity ahead of peak season 2020. And, of those retailers surveyed, 36% anticipated investing even more in extra fulfilment capacity in 2021.
Multi-node fulfilment can also serve as an effective solution to brands facing the capacity crunch. Rather than operating and holding stock in one larger distribution centre, this concept utilises multiple ‘nodes’ strategically placed to serve a variety of locations. These micro-distribution centres when underpinned by an effective distributed order management system (DOM) can enable brands to identify which facility can fulfil the order most effectively, i.e., within the shortest time frame. Once identified the DOM can successfully route orders to ensure all inventory is fully utilised.
As we navigate the demands of a new digital era for retail, the capacity crunch being faced will only continue to grow. And this will become a serious issue for brands who are unable to overcome it. The next stage of growth for online brands will be hinged on identifying alternative distribution and fulfilment infrastructures, and utilising them to ensure consumer demands can be met effectively.
Christophe Pecoraro, managing director, PFS Europe
For more information, visit https://uk.pfscommerce.com