How online retailers can beat Amazon
We know online retail is one of Australia’s most competitive industries and with international entrants like Amazon entering the $18 billion market, retailers across the board are facing increasing pressure to maintain their share of the Australian consumer spend, particularly given Amazon intends to “destroy the retail environment in Australia” by outpricing competitors by 30 per cent.
One of the many reasons Amazon is taking over global markets is through smart logistics and supply chain, focusing on customer experience and fast shipping by via a global network of distribution centres.
Senior manager at Amazon Global Logistics Brittain Ladd recently told Australian media Amazon will “launch as many services and products as possible within Australia,” which will see services like Amazon Prime, Amazon Go and Amazon Fresh made available to local consumers. However, whilst they’re giant online, Amazon has almost zero footprint when it comes to the offline world outside of the US- a huge advantage for retailers, particularly chains and franchises.
There’s word Amazon is scoping availability of warehouses locally, but Aussie retailers still have the upper hand, for now. Ladd said the company would “build physical grocery stores and launch Amazon Go only after Amazon has become more established in the country and analysis determines the market will support physical stores”. Amazon does not expect to be fully functional in Australia until late 2018, so there’s still time to act.
By making stores work smarter as distributed warehouses, retailers can recoup some of the potential losses faced when Amazon lands and beat them at their own game while they’re young in market. Ship-from-store capabilities allow retailers to better compete by increasing their speed and scope of delivery, improving the shipping experience for customers, expanding capabilities (like click and collect, driving customers into stores) and reducing shipping costs.
Companies like Harvey Norman, Winning Appliances and Petstock are executing the model well, with others following suit. On average, Shippit data shows retailers can expect a 25 point improvement in Net Promoter Scores, a 75 per cent reduction in fulfilment time and a 13 per cent reduction in shipping cost per order.
Based on analysis and feedback from Shippit clients who have invested in the model, we’ve observed 3 key points for setting up distributed warehouses with bricks-and-mortar stores:
Set stable foundations:
For any new system, particularly one that impacts customer experience, it’s important to get it right from the start. From infrastructure to policies, plan and test before you go live. Ensure you have a reliable tech platform to manage and track orders in the backend as well as a user-friendly system in place for customers. Develop policies and procedures around the operation of store shipping and that staff are well trained to understand and operate the system.
Get stock right:
The more stores you have, the more complicated it can be to get stock ratios right. Before you start, conduct and analysis of where your stock is sitting and ensure you’re carrying a minimum volume of bestsellers across key stores. Consider factors such as location (vicinity to central areas, access to freeways etc will optimise the speed of delivery) and spatial availability within stores. If data is available, look at consumption trends across store locations. Often, clear purchase patterns that correlate to demographics such as age, income and culture across different suburbs can be observed. This data can inform predictive shipping, meaning the ability to pre-assign reserves of popular stock in certain stores to meet market demand. As your distributed warehouse system becomes more sophisticated, pulling and analysing this data becomes easier to interpret and utilise on a large scale.
Watch and learn:
Ensure you’re tracking the implementation of your distributed warehouse system from the outset. Take note of performance, track order volume and speak to customers in order to gain valuable feedback. Each month, quarter and year, conduct comparative reports which drill down into what is working, what can be improved and the benefits that are being achieved. Think about how your system is stacking up against competitors. From here, use these evaluations to further refine and iterate your service to make sure you’re running the most efficient system from a business perspective as well as an outstanding customer experience.