New retail model for high street shops, eCommerce leveraging urban logistics

The rapid and relentless rise of eCommerce means bricks and mortar retailers must embrace an ever changing logistics model. The need is for a leaner more agile operation and this is being realised by high street retailers such as Argos as they compete to stave off the big pure play specialists.

As part of the retail sector's response to internet savvy shoppers it seems only yesterday that stores implemented Click and Collect (C&C). Now 70 per cent of Tesco Direct's business is C&C. The success of this channel creates a new challenge as retailers need to provide more storage room for goods that hang around waiting for customers to collect them. This comes at the expense of stock room space and John Lewis will charge for the C&C service from August 2015.  
But is there a better approach; a model where retailers carry limited stock or only display items and leverage C&C? To prevent evolving C&C requirements damaging other aspects of an omni-channel business, stores will need to be supported by localised replenishment hubs that provide more frequent deliveries to what will become minimally stocked outlets. These hubs will not be located in rural wastelands but conveniently close to the stores which suggests the inevitable rise of a two tier service for town and country based on simple economies of scale.  
C&C shopping does not create a uniform demand and to handle the growing fluctuating volume of C&C orders stores must be supported effectively by a purpose-designed and technologically equipped replenishment operation that is people-centric. The benefit of pursing this strategy is that the retailer can continue to drive sales and simultaneously maintain stock without the risk of having high volumes of unwanted products in the wrong locations.
The e-and-mCommerce customer demands response, convenience and value and assumes anytime-anywhere engagement is normal behaviour. Retailers who can best manage the growing success of C&C, and can leverage other forms of retail utilising eCommerce technology, stand the best chance of profit at the expense of the laggards. Could this mean that the high street shops of the future are not stocked with multiple quantities of each SKU? With lower stock cover the customer will have the physical experience with the product but will order in store for later delivery – possibly generating a rise in more city centric urban logistics fulfilment centres.
About Total Logistics and the author
Total Logistics is an independent management consultancy that specialises only in logistics and supply chain. With over 25 years experience helping clients across Europe on all aspects of retail and manufacturing solutions, we are uniquely placed to bring expertise and experience to our clients.
Martin Brickell is a director and the eCommerce sector lead at Total Logistics, and is always happy to discuss eCommerce / fulfilment solutions.