The disruption that defined 2020 is still impacting most retail supply chains in the U.S. in significant ways. As the dust continues to settle, a number of trends will almost certainly transform the retail outlook in the years to come.
Both consumers and retailers are now far more likely to use tech-enabled shopping options than they were twelve months ago. This changing landscape telegraphs some larger changes on the horizon — not to mention a lot of promise for the retail industry in a post-COVID-19 world.
Observant readers will note that many of the 2021 retail supply chain trends in this roundup represent an acceleration of the vision set in previous years. Ecommerce supply management and fulfillment have been on the cusp of a major shift for some time now, but conditions created by the pandemic have activated new technology adoption across segments. These new tools and software integrations are building upon one another, and changing the way retailers bring goods to their customers.
Trend #1: Increased Technology Adoption
The retail industry was already pushing toward greater adoption of technology on multiple layers of the sales lifecycle, from production to fulfillment to in-person shopping experiences. Social distancing has made person-to-person interaction more difficult, but it also helped push companies toward implementing more streamlined, low-inventory ecommerce workflows.
At a time when imports have increased, the inventory-to-sales ratio dropped to 1.31, down from 1.40 this time last year according to FreightWaves. Some experts suggest that this comes from the changing role of brick and mortar retail stores, from a fully consumer-facing entity to something more like a regional fulfillment hub. While inventory replenishment is likely on the horizon for 2021, new shopping habits and consumer tastes will necessitate a new hybrid fulfillment model that is fit for the changed world.
Some retailers have taken a different approach to inventory management by adding on-demand production of products like clothing. For example, Amazon launched a “Made for You” line of t-shirts that are fully customizable and made to order, which could prove to be more nimble and more sustainable than “fast fashion” practices.
Trend #2: A New Vision for Brick and Mortar
A steep decline in in-person shopping didn’t curb the demand for goods. In fact, a lot of consumers turned to online shopping to replace in-person retail therapy during an especially tough year. This will likely continue through at least the first half of 2021.
Many brands have converted much of their back end operations into micro-warehouses to support rapid delivery. Companies like Target, which has a network of retail locations in most population centers, have introduced next-day delivery where traditional warehouse space is both costly and scarce (this alternative to Prime was already growing in popularity prior to COVID, and has only accelerated since).
Meanwhile, Whole Foods is experimenting with a delivery-only “dark store” to manage gig-economy grocery demand and minimize the impact of door dashers on the in-person shopper experience.
Trend #3: Greater Focus on Seamless Omnichannel Shopping Experiences
The brick and mortar of 2021 and beyond is more than a place to introduce customers to products — it’s part of an omnichannel network of highly connected logistics hubs that manage delivery, pickup, and returns for customers who want to minimize contact with the public.
Perhaps the defining feature of the new ecommerce ecosystem is the rise of click and collect and Buy Online, Return In-store (BORIS) options for customers. These practices require advanced inventory management software that can balance automated ecommerce with expedited pick and pack capabilities. Brands no longer have years to figure this stuff out — ready or not, the future is here.
Trend #4: Higher Demand for Reverse Logistics Solutions
Companies that thrive in 2021 will meet the demand for innovative reverse logistics solutions. Essential to that mission are networks of For 100% ecommerce retailers, partner organizations in such malls and department stores can enable all the benefits of in-person shopping without a physical presence.
For example, the partnership between Amazon and Kohls allows the ecommerce giant to provide easy in-person returns and minimizes the costs associated with traditional reverse logistics, all while driving foot traffic to the brick and mortar partner (a 25% off Kohls coupon offered to customers with returns doesn’t hurt either, incentivizing cross-selling that would have been inconceivable a decade ago).
Reverse logistics are evolving at a rapid rate — don’t be surprised if touchless curbside returns become the next big trend in late 2021.
The world looks very different than it did this time last year. But regardless of everything that has happened, the macro trends in the retail supply chain haven’t shifted — everything we’re seeing now aligns with expert predictions from a decade ago. What has changed is the rate of adoption that many ecommerce retailers face. Inventory needs to be available on-demand, and delivery needs to move at the speed of Amazon. Retailers no longer have liberty to figure it out as they go.
Thankfully, businesses of all sizes can partner with 3PL firms to power advanced freight-forwarding and warehousing services that make inventory available — and fast. Partnering with a portside leader like GlobeCon provides your retailer with access to the latest technology without costly investment in technology and infrastructure. Plus, a 3PL can scale to meet shifts in demand, which is an essential value-add during times of uncertainty.
Get your portside operations up to speed with an established 3PL partner at the Port of Los Angeles and Long Beach. Contact us!