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E-commerce giants are turning to brick-and-mortar stores to supplement their continued growth trajectories. Could this mean the e-commerce market is too saturated?

To say that online shopping and e-commerce has boomed in the last decade would be a gross understatement. In 2014, retail e-commerce sales worldwide were 1.3 trillion U.S. dollars. That number rose by 954 billion as of this year and is estimated to hit nearly 4 trillion by 2020. However, despite the impressive numbers, there seems to be a shift in strategy amongst the titans of the booming online retailer industry.

A few weeks ago, Reuters reported that Chinese e-commerce giant Alibaba had announced plans to move into the physical realm of brick-and-mortar stores. The move is a strange one for the company given that until now, its made $392 billion through digital sales alone.

Alibaba’s American counterpart, Amazon, has made similar announcements. Its recent purchase of Whole Foods and unveiling of an automated physical store late last year indicates the company is already on a similar trajectory.

The question to ask is why is this trend happening. Reporter Robyn Mak, who broke the Alibaba story, suggests that its because the retail e-commerce market is reaching its limits for the industry titans.

Alibaba’s New Strategy—Invest in Old Models

According to the Reuter’s article, Alibaba founder and executive chairman Jack Ma, has outlined the following plan for the company:

  • The company will upgrade existing physical shops in partnership with established retailers.
  • The company will also build its own stores from the ground up.
  • Continued support for “Hema”, Alibaba’s own supermarket chain where can customers buy and have groceries delivered. Some stores even allow customers to choose fresh produce and have cooked in-store.
  • Explore a similar Hema strategies for clothing.

Hema has been especially successful for Alibaba so it makes sense for the company to increase investment. As Robyn Mak stated:

The attraction for existing retailers is a chance to boost their notoriously low margins by tapping into Alibaba’s technology and platforms to manage inventory, supply chain, and logistics. Stores can also benefit from using the tech giant’s algorithms to analyse shopping habits and by moving to cashless checkouts, powered by Alibaba’s payments affiliate […] The e-commerce group boasts that sales per unit area at Hema are up to five times higher than a traditional supermarket

e-Commerce Around the World

The potential windfall profits that could be made through e-commerce has led to many new online businesses. In fact, there was an estimated 12 to 25 million online stores worldwide according to a 2014 study.

Most of that money trades hands in North America, followed by Europe and then China.

The world of ecommerce is dynamic and has opportunities for innovative new start-ups. At this point, Amazon and Alibaba might be too big to grow further.

Currently, 85% of China’s retail spending happens in brick-and-mortar stores. So while Alibaba is starting to stagnate in its online sales, it can continue its expansion into physical markets.
As mentioned earlier, Amazon has already started on this path. They invested $13.7 billion to acquire and rebrand the Whole Foods Market chain.

Balancing the Pace of Technology and Consumer Demand

As more people go online to do their shopping, the e-commerce market will continue to grow. Alibaba and Amazon are in the process of developing developing new strategies. But because of the demand in ecommerce, new avenues need to be explored for the industry titans. This won’t mean either company will give up any ground online. Instead, each has its own plan to expand past the digital store.

If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.

Morai-Logistics-Blog-Uniqlo-Fast-Fashion

Uniqlo is speeding up its production cycle to compete in the shipping race with other fashion retailers by compressing its design-to-deliver supply chain down to just 13 days.

Few things in life move as fast as fashion trends. Just as a style becomes widely accepted, its immediately replaced by something new and different. It’s no surprise then that self-styled fashionistas want what’s hot on the catwalk as soon as they see it.

Fashion retailers try to oblige by optimizing aspects of their supply chain so the latest trends reach mainstream consumer markets as quickly as possible. There’s even a term for the process, it’s called ‘fast fashion’.
This is top priority for retailers such as Peacocks, H&M, Topshop and Zara. And now, it’s also Uniqlo’s guiding philosophy as of this March announcement.

What ‘Fast Fashion’ Means to the Uniqlo Brand

Uniqlo embracing the fast model marks a departure for the company. For years, its brand message was of “quality first, then price” and “simple made better”. It never really chased the most current trends, instead opting for providing wardrobe essentials. However, 2016 saw a disappointing year for the retailer. The company made a 40% cut to its revenue predictions for the next five years. It’ll now be putting more resources into something Zara has been doing well—speed.

According to Bloomberg, Uniqlo is trying to compress its design-to-deliver chain down to just 13 days. Despite the reduced time, company owner Tadashi Yanai is assuring customers that the Uniqlo brand will retain its identity:

Zara sells fashion rather than catering to customer needs. We will sell products that are rooted in people’s day-to-day lives, and so based on what we hear from customers.

Uniqlo also announced it plans to improve its supply chain with heavily automated production facilities and artificial intelligence to determine the most efficient design and delivery routes.

Fast Fashion for a World Where Everything is Fast

An article on Glossy.co covering fast fashion suggested that the philosophy of faster delivery is linked to instant gratification, and for many retailers, it has helped lower the return rate. Writer Jeff Manoff describes how during the New York Fashion Week, big names such as Ralph Lauren, Michael Kors and Tommy Hilfiger revealed see-now, buy-now styles. Several retailers even had one-day delivery options.

There are a few reasons why this is happening according to Manoff:

  • In eight years, the total sale of luxury sales online is estimated to reach $90 billion.
  • Delivery times have been decreasing. They went from nearly 5 days in 2013 to around 4 days just two years later.
  • Customer expectations have also shifted. Unless a delivery is made within two days of purchase, it’s no longer considered “fast”.
  • Even same-day delivery may no longer be enough. Some retailers are now offering one-hour and 90-minute deliveries.
  • Faster delivery is linked to a decrease in return rate which helps overall sales.

Closing Thoughts on Uniqlo’s Clothing Logistics

Uniqlo’s literal change of pace may be a shock to some of its customers. However, it shouldn’t be too much a surprise for anyone looking fashion retail industry trends. Customers want and expect to have things immediately after they order them. As online shopping grows, the number of people with similar demands will also increase. If the fashion, or any retail industry really, wants to stay viable, it’ll need to shorten its supply chain and speed up delivery.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.

online shopping image spread

Changing consumer behaviour is reshaping and revitalizing industrial sectors by funneling resources into warehouse construction.

According to an article by the Wall Street Journal (WSJ), the digital market place is having a physical impact on urban landscapes. Throughout the U.S, industrial pockets are seeing a “economic renaissance” reports the article’s author, Erica E. Phillips.

Large city malls and brick & mortar stores are being closed throughout the country due to dropping consumer interest. In their place, more people are shopping online for what they need. As a result, more warehouses are needed to store everything. This has led to formerly struggling industrial areas receiving fresh investment as land prices for new distribution centres increases.

Online Shopping—The World’s Biggest Marketplace

It can be hard to imagine, but even the idea of online shopping is still relatively new. The earliest version of the concept only dates back to 1979. Industry giants such as Amazon, Alibaba and Ebay are only 23, 18 and 22 years old respectively. In the two decades since they started (a little less in Ebay’s case) they, and companies like them, have revolutionized how people shop.

According to Statistica.com:

  • In 2013, US mobile commerce revenue amounted to more than 38 billion US dollars
  • Alternative payment methods such as digital wallets or online payment providers have seen increased adoption rates and rapid growth in the past few years. Ebay-owned PayPal is one of the current market leaders with more than 14 billion US dollars in mobile payment volume alone
  • A 2016 study by analytics firm comScore found that shoppers make around 51% of their purchases online. The number of has been consistently rising by 1% for the last few years

Even luxury retailers are turning towards being more online shopping-friendly. A different WSJ article reported that retailers of high-end goods are scrambling to go online as sales are starting to fall. This is because even wealthy customers like having access to better deals and selection at their finger tips.

From Shopping Centre to Housing, and Neighbourhood Mall to Restaurants

As more families shop for their necessities online, where does that leave traditional brick and mortar stores? Unsurprisingly, many have either dedicated part of their operations to compete online themselves, changed to become more service-based, or closed down altogether.

Phillips comments on how the space shopping centres used to occupy is being re-purposed:

Many cities are razing downtown shopping centers from a bygone era to make way for hotels, office buildings and new housing developments. Suburban malls trying to keep the doors open have shifted their focus to higher-scale restaurants and new entertainment offerings, such as golf driving ranges, wall climbing and skydiving simulators.

All this is a win-win for consumers and urbanites. As warehouses become a way a life for formerly struggling communities, consumers everywhere will have access to a wider range of products and deals. The weekly shopping can then be completed in just a few minutes. This leaves more time for a family to explore the new restaurants that have sprung up where the old malls used to be.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.

morai-logistics-blog-santa-ecommerce

eCommerce operations is the true Santa’s workshop and its logistics and supply chain professionals that scramble during the holiday season to make sure that your gifts and goodies arrive just in time for the holidays!

Most people are readying themselves and their bellies for the holidays, logistic providers are readying themselves as well. eCommerce businesses in particular, started preparing for the holidays back in August. Although Black Friday and Cyber Monday are behind them, there is still Christmas Day and Boxing Day still looming later this month.

Right now, operation teams across North America are making their lists (of inventory and personnel) and checking it twice (and several more times for good measure). Thanks to Black Friday and Cyber Monday they’ve found out which retailers and shippers are naughty or nice. This is because when the holidays come, customer shipments are comin’ to town (every town)!

Getting the Workshops Ready

According to a recent Wall Street Journal Logistics Report written by Loretta Chao, Transportation and warehouse companies added about 8,900 jobs across the U.S in November.

The number of warehouse operator jobs grew by 3,100 jobs from October to November. Payrolls have also increased as its grown by 47,000 jobs over the past 12 months.

It wasn’t only fulfillment centers that saw an influx of newly hired associates. As Chao points out,

Courier and messenger companies, including the package carriers that deliver online orders, increased their payrolls by 5,700 jobs last month, expanding employment in the industry by some 26,300 jobs from a year ago, according to the U.S. Department of Labor jobs report. The gain followed the addition of 12,200 transport and logistics jobs in October

Big Business in Gift Giving

The reason the holidays are such a scramble for retailers is because of the amount of business they stand to gain. In the U.S alone, the holiday season generated over three trillion dollars for the retain industry in 2013. The holiday sales accounted for 19.2% of retail total sales that year.

Increasingly, people are turning to online shopping. In terms of numbers, by 2010 B2C ecommerce sales totaled $283 billion USD in North America. By this year’s end, ecommerce sales are predicted to reach nearly $600 billion according to Statista.com.

In 2015, the holidays season saw desktop retail e-commerce spending in the U.S reach over $56 billion USD. Most of that money was spent online on Cyber Monday.

Cost of Late Deliveries

Understandably, customers will be upset if the items they ordered online don’t arrive on time. The main draw of purchasing gifts online is the promise of convenient and speedy delivery after all. Failing to hit deadlines means not just having angry customers, but also losing their trust when they need to do their holiday shopping in the future.

The holiday season of 2013 is the worst example of this. A shortened holiday season and erratic weather were cited as the reason for delays, but the damage was done. Customers were angry. It took costly good will gestures to regain their trust.

As 2016 ends, remember all the people that helped make your holiday special. Receiving gifts is great, but more amazing is the gift’s journey and the people around you!

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.

morai-logistics-blog-tips-holiday-peak-season-logistics

November is almost at an end. As December nears, the holiday peak looms for many distribution centers. The season will be the busiest for us in logistics and transportation thanks to Black Friday, Cyber Monday, Christmas Eve, and Boxing Day.

Customers will be expecting to receive their purchases and gifts with little hassle. This means that for many organizations, the sole focus of the winter peak will be to customer satisfaction. Thanks to the increasing number of people shopping online, the winter peak is especially volatile for orders.

Proper planning for the winter holiday peak should have started months ago. Some businesses go all-hands-on-deck as early as August, or October. While strategic planning is important for a smoother peak, it doesn’t guarantee it. There are several ways the plan can become derailed.

This week we’ve decided to focus on the five ways to help make sure your business stays on track.

1. Clarify Your Expectation to the Staffing Providers

As Deborah Ruriani of Inbound Logistics points out in her article, planning for the holiday peak should have involved your staffing providers. With the winter peak so close, it’s important that the expectations of your relationship are re-communicated. Turnover is likely to be high until the peak is over. Staffing providers need to ensure that new hires are of the same standards as those they are replacing.

2. Audit the Preparedness of Your Organization on All Levels

As the holiday season approaches, it might be tempting to hunker down and only focus on your work until it passes. Doing so puts your organization at risk. Fulfillment centers can only succeed if all its parts are all working smoothly and towards a common goal. Any weakness in the management, operations, support, HR or other departments can lead to a domino effect.

3. Regularly Check the Morale of Your Employees

It’s normal for stress levels to be higher during the holidays. A lot is expected of the staff and they’ll have tight deadlines in which to accomplish these tasks. Stress levels can’t get too high however. Too much stress over too long a period will cause mistakes. Too many mistakes will cause more stress, growing and extending the cycle.

4. Check and Update the 5S Lean or Other Quality Initiatives

The 5S Lean Methodology is a strategy on how companies organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order. By this time of year, your company should have a detailed space utilization plan in place. But remember, this time of year is volatile so your plan may need tweaking. You’ll need to check which variables have changed since the plan was drafted and adjust accordingly. Flexibility is crucial in this area.

5. Continue to Audit your Building’s Processes for Best Practice Research

Peak is an important time for many organizations. This is why a record of what worked and what didn’t needs to be kept during and after every peak. Each peak brings with it the opportunity to do things a little bit better.

The winter peak is a stressful time for many of us in the logistics industry. Our customers expect us to deliver so they can have a happy holiday season. It’s because of our customers that we need to ensure that both the planning and execution of peak plans are done with the utmost dedication and care.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.

morai-logistics-blog-omni-channel-fulfillment

With so much discussion over omni-channel fulfillment being the future, it is interesting then that only 19% of the top 250 retailers are currently fulfilling omni-channel demand profitably, according to a new the third annual Sands Future of Retail Report.

Despite such a small percentage of top retailers making a profit from omni-channel fulfillment, the service is in high demand by customers and growing.

For example, for nine out of ten consumers, free shipping was reported as the top incentive to shop more online. This number has grown to become the top consideration. One-day shipping (69%) and free returns (68%) also continue to be top drivers.

The Future of Retail and Logistics

There were other key findings of note in the study:

  • Nearly a third of consumers (31%) now shop online at least once a week, an increase of 41% from two years ago.
  • Only 9% of consumers have used same-day shipping in the past year, but almost half (49%) say same-day shipping would make them shop more online if it were offered more frequently.
  • 40% of consumers expect to receive their first drone-delivered package in the next two years or less. Less than a third (31%) think it will take more than five years.
  • Among consumers who don’t trust drones to deliver packages, theft and damaged packages are the top concerns (72% each), but safety (68%) and privacy (60%) seem less risky than they were a year ago.

A theme throughout the study from customers was the expectation of greater and greater speed of the supply chain. This can be seen by the finding that consumers who shop online more than twice a week are twice as likely to be persuaded by same-day shipping as consumers who shop online only a few times a year (63% vs. 32%).

The main reason that so few top retailers are yet to make a profit from omni-channel fulfillment is simply that they have yet to figure out how.

According to the 2015 Third-Party Logistics Study, fully one-third of all respondents (nearly 800 manufacturers, retailers and 3PLs) say they’re not currently prepared to handle omni-channel fulfillment.

Tim Foster, managing director, Asia-Pacific, with supply chain consulting firm Chainalytics weighed in on the discussion.

“Forester believes manufacturers and retailers will address this market transformation by eliminating non-value-adding activities within the supply chain. He cites the example of pharmaceutical distribution, where the traditional supply chain flow from manufacturer to wholesaler to retail pharmacy is being replaced by either a direct flow from manufacturer to retailer, or a loop with the 3PL in the center” summarizes Material Handling and Logistics News in this article.

3PLs have some time to catch up to customer demand. Privacy and security concerns are hampering the demand for omni-channel distribution in the areas of mobile phone payment. “This could explain why adoption has essentially remained flat year over year, with about a third of consumers having used these applications. Still, U.S. mobile payment transactions are expected triple in 2016 to $27 billion, a sign that a few eager early adopters and the growth of Apple Pay could eventually force more widespread changes in consumer behavior” concludes the article.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.