Boosted in part by pandemic-induced store closures, eCommerce (online retail) entered the spotlight worldwide and will continue its impressive growth as global online retail sales are expected to reach $5.4T in 2022, representing 20% of total global retail sales.¹ China alone accounted for 52% of all eCommerce sales in 2021, followed by the U.S at 19%.¹ Consumers cite convenience, greater options and lower prices as top drivers to shop online.
Over the past few hundred years, the West has been the frontier of retail innovation, pioneering the shopping mall, supermarkets, and web-based online shopping. However, this frontier has been moving eastward each year. China and other emerging economies have paved the way for a new type of eCommerce that combines innovations such as mobile commerce, social commerce, live streaming and digital payments.
This technology has already expanded globally. Nearly 200 million Americans will be shopping on their mobile devices by 2024.12 Because consumers are able to shop more quickly, conveniently and from any location, online retail has put enormous pressure on supply chains to be faster and more agile.
Supply chains have historically been global even before eCommerce took off. But they were slow, inflexible and cadenced. Retail goods all had one final destination at a known location - the retail store floor. With eCommerce, consumers can now shop at any time and request purchases to be delivered to any location. eCommerce supply chains cannot adopt the retail model of yesterday - they need to be faster, more adaptable, agile and visible. A well-oiled supply chain and delivery experience can make or break a sale.
In an effort to make those sales, here are a few key challenges that are on the top of eCommerce supply chain managers’ minds for 2022:
Consumer Delivery Demands
Consumers expect products to be available, prices to be low and their own convenience to be prioritized during their path to purchase. Delivery must be fast, free and flexible - allowing them to choose delivery locations, times and dates. This requires supply chains to be flexible and efficient, reducing time and costs and passing these on to consumers. This orchestration must be communicated with consumers transparently, keeping them informed of product availability and estimated delivery dates as 93% of consumers want to stay informed throughout the delivery process and 47% will not order again from a brand with poor delivery visibility.2 Moreover, 84% of consumers wouldn’t shop a retailer again after having had a bad delivery experience. Tech-enabled supply chain solutions can help online retailers achieve a delivery experience worth coming back for. Visibility technology allows retailers to view inventory levels and movement across the supply chain. Delivery orchestration technology allows retailers to optimize routing and fully leverage omnichannel fulfilment, reducing time and cost of delivery. Consumer experience technology allows retailers to tailor their delivery experience and communicate status updates to consumers.
Online retailers worldwide are now available to consumers. This has created an online retail environment that is fiercely competitive, as consumers now have unlimited options to choose from. Products are no longer judged on quality, price and other traditional factors alone, but are now also judged on how quickly and cheaply they can be delivered - 95% of consumers prefer free-one-day delivery as their ideal delivery method.3 Companies that can achieve faster, cheaper and more flexible delivery have a competitive advantage. This has forced online retailers to orchestrate their final mile delivery systems to reach shoppers with speed, precision, and flexibility at a low (or no) cost. For many retailers, this is a challenge to do alone. Strategic partnerships with tech-enabled solutions can enhance their supply chains and delivery orchestration, giving them a leg up on the competition, as consumers will likely opt for retailers that are able to provide better delivery terms.
Supply Chain Visibility
Very few online retailers have full visibility of their supply chains - most only have partial visibility. Full visibility allows retailers to read dynamic market conditions and make informed decisions on how best to react. Take the recent supply chain crisis for example - online retailers who have better visibility into their supply chains are better able to react to bottlenecks and routing challenges.
Costs, technology integrations and failure to realize the value of visibility are the largest barriers for end-to-end visibility adoption. But the costs of not having visibility may be far greater. By not being proactive to supply chain challenges in real-time and not being able to communicate status updates to end consumers, online retailers can lose their competitive edge (and maybe a sale or two).
High Demand, Low Capacity
Strong household balance sheets and reduced demand for travel and hospitality have contributed to a surge in demand for retail goods over the past two years. Great news for online retailers’ finance departments, bad news for their logistics departments. Supply chains have limited capacities and are oftentimes rigid and inflexible. When demand outstrips supply capacity, online retailers may find themselves in a pinch. This has been one of the major factors contributing to the recent supply chain crisis. To overcome this, supply chains must be proactive and predictive to foresee demand surges early and they must be efficient to maximize available capacity.
Because many retailers have been unable to handle demand surges, the recent increased demand for goods worldwide has created product shortages as supply chains cannot grow capacity quickly enough. This has resulted in supply chain bottlenecks that have left warehouses empty and have extended dates for product availability. This is a top concern for online retailers as sales and consumer loyalty are compromised when products are unavailable. Some experts are predicting the recent global supply chain crisis to continue for another two years.4 Agility and adaptability are crucial for online retailers to be proactive in this environment. And once the recent supply chain crisis subsides, the next one may be just around the corner.
Final Mile Delivery & Omnichannel Fulfillment
As online retail grows, retailers must increasingly deal with the costliest part of their supply chain - the final mile. As a share of the total cost of shipping, last-mile delivery costs are substantial—comprising 53% overall.5 Wherever they live, whether in dense urban centres or in rural towns far from distribution centres, consumers expect to be reached with speed and efficiency, all at a low cost. New technology such as tech-enabled delivery orchestration software, autonomous vehicles, drone delivery and nontraditional omnichannel fulfilment methods are gaining traction, increasing efficiencies and reducing challenges and costs in the final mile.
Online retailers are increasing supply chain capacity and flexibility by utilizing non-traditional fulfilment centres such as dark stores, curbside pickup, pop-up distribution centres and micro-fulfilment centres. This strategy increases agility for retailers but also introduces greater complexity. Managing multiple methods of fulfilment and delivery is a challenge. Technology can help retailers overcome these challenges by enabling enhanced route optimization, the use of crowdsourced gig-fleets and greater visibility of product status throughout the delivery process, to name a few.
Cross-border eCommerce is the spice trade of the 21st century. In 2022, 22% of all online shopping sales will be generated internationally.6 Consumers now have access to the world’s retail stores, and they are growing more comfortable buying from retailers abroad. This is especially true in smaller countries that are in close proximity to others. Austria, Ireland, Israel and Singapore all boast high cross-border purchase rates. Fashion, consumer electronics, and hobby items are the most likely goods to make buyers look beyond their local selections and expand their online shopping habits.
As weight and size play a significant factor in shipping calculations, products in these categories are often light enough to not be subject to extra shipping limitations (extra import duties, costly shipping), which is also why large items, like furniture or home appliances, are still unlikely to be shopped from abroad.
The top concerns for consumers shopping online abroad are unfamiliarity with foreign markets, payment security concerns and shipping complications.7 Thankfully, supply chain technology today allows for enhanced visibility of shipping status, clearer chain of custody tracking and faster, more flexible delivery. The right technology tools can even support the calculation of duties and taxes at the point of sale to avoid surprise charges at the border. This may just make the unfamiliar world of cross-border eCommerce a little more familiar.
A crucial area where online shipping falls short is the ability for consumers to see, feel, and temporarily experience many of the goods they purchase. Consumer satisfaction is thus compromised when a sweater purchased online fails to meet expectations. Thankfully for consumers, most retailers offer online returns policies. And consumers are using them. Around 30% of online orders are returned, compared to 9% for items purchased in-store.8 This is causing major headaches for retailers and their logistics partners, as returns are costly and difficult to orchestrate. The solution to the online returns conundrum lies in innovative technology and enhanced partnerships between shippers, logistics providers, and tech-enabled platforms. A perfect solution can offer free, fast, flexible, and sustainable returns to consumers and low-cost, resource-light processes for retailers, ensuring both parties are satisfied.
Increased global focus on sustainability has created incentives for retailers to brand their products and delivery services as having a minimal impact on the environment. Why? Because consumers demand it. Nearly 60% of consumers are willing to change their purchasing habits to help reduce negative environmental impact.11
Surprisingly, 90% of all consumer goods companies’ carbon footprints are accounted for in their supply chains.10 Nearly half (49%) of all companies have corporate supply chain sustainability goals, but another 35% lack such objectives.9 Online retailers must create more efficient supply chains that reduce their use of fossil fuels and orchestrate the movement of products through the supply chain in the most efficient manner. Routing software can help achieve this goal, and many of the top platforms today enable supply chains to measure their carbon footprint reductions. This can lead to an enhanced brand image, a boost in sales and greater consumer brand loyalty.
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