MHD talks with uTenant’s Kyle Rogers about the evolution of e-commerce, and the new possibilities this brings to omnichannel fulfilment.
Kyle Rogers, Co-Founder of uTenant, and a Director of the Supply Chain and Logistics Association of Australia (SCLAA), says that a key trend to watch in the e-commerce space is what he terms “shop to shed” – the way in which traditional retail outlets or inner city properties might be transformed into warehouse and distribution space as a means of securing omnichannel fulfilment.
Kyle notes an oft-quoted ideal for theorists of the supply chain: “In the perfect supply chain, the warehouse doesn’t exist.” This is of course an impossibility, but it reflects the consumer’s perspective in practice. “From a consumer’s perspective, they don’t see the importance of the warehouse,” he says. “They shop, they get their new shoes, they put them on, and they’re ready to go. From their end, the consumer doesn’t see how stock is manufactured, imported, and sits in a warehouse, before it is delivered to their door.” For there to be effective warehousing and supply chain operations moving forward, Kyle says, logistics professionals must get inside the mind of the modern consumer.
E-COMMERCE AND THE CONSUMER PSYCHE
Kyle says it is important to consider the psychology of the consumer when implementing warehousing and fulfilment strategies. Diversifying and decentralising its warehousing enables a business to provide the consumer with a quicker and more seamless delivery service.
“Generally speaking, when people buy online, it is fulfilled from a warehouse. But what some of the big-name brands are realising is the necessity of improving their omnichannel fulfilment,” Kyle says. “So not just fulfilling orders from one big warehouse on the outskirts of town, but actually being able to fulfill e-commerce orders from their more centrally located retail outlets, too. If I order online in Melbourne and there is a shop across the road that can fulfill that order, why should it be shipped from a warehouse in Sydney? Improving the capacity for omnichannel fulfilment is a big thing I believe we’ll see going forward.”
The necessity for retailers to diversify their fulfilment capabilities will be driven by a shift in the consumer psyche that was already occurring but has been pushed forward by COVID-19 and the imperatives of online shopping. “More people of all generations are more inclined to do online shopping,” Kyle says. “The more consumer habits continue to steer towards online, the more that experience is made better by quicker fulfilment and delivery times.”
But is there a ceiling to consumers’ increasing demand for e-commerce over traditional bricks-and-mortar retail?
“I do believe there is a ceiling,” Kyle says. “Because traditional retail stores still play such a large role in customer experience. A number of studies from America have shown that omnichannel fulfilment – for instance the ability to buy online and return in-store – is a key ingredient to keeping customers. If a customer is able to return an item bought online to an actual store, then that provides a greater opportunity not only for a tailored customer solution – helping them replace what they bought with what they really desire – but also an opportunity for that retailer to establish a personal connection and to upsell, too. So physical stores and e-commerce are complementary, it’s not either/or.”
He adds that there will always be an essential human factor at play with regard to the act of shopping: “People like to go out shopping in person; they like to go out to show off their new shoes, to meet with friends, to go out to restaurants, and to engage with that social dimension of shopping.”
TOWARDS OMNICHANNEL FULFILMENT
Kyle doesn’t think that the traditional national distribution centre (NDC) has had its day. Rather, he says, we could see a move towards a more hybrid model that includes NDCs as well as third party logistics provider (3PL) warehouses and micro fulfilment from retail stores.
“I foresee a situation where a company might have one large NDC, then retail stores to cater for the in-season stock, then perhaps additional warehouses to host other stock types targeted towards different demographic and geographic customer bases,” he says.
“To give a concrete example: Nike, Adidas, and Puma all have their main NDCs in Melbourne, not in Sydney. What we could see in the future is that in addition to their NDC and their retail outlets they might hold a certain amount of product with 3PL providers in every state,” he says. “Such a situation will allow them to be closer to the consumer, and this is a positive for three main reasons: firstly, because inbound product can go directly where it needs to, rather than arriving in a container in Melbourne and then having to be sent to Brisbane; secondly, being closer to the consumer means faster lead times and turnaround times; and third, having more locations means reduced outbound costs.”
Kyle is even thinking creatively about how smaller, inner city spaces might be utilised for micro-fulfilment purposes. As a database and network ecosystem facilitating creative arrangements between landlords, 3PLs and product owners, Kyle notes that it is uTenant’s purpose to think up innovative and best practice solutions in the industrial property arena. But it’s one thing to think and another to deliver. And that’s where uTenant’s new relationship with JLL comes into play.
JLL is one of the world’s largest commercial real estate agents, and earlier this year became a minority stakeholder in uTenant. The commercial real estate giant wanted to back the young industrial property innovator, and uTenant saw the massive opportunities and access that the partnership would bring, Kyle says.
Teaming up with JLL allows uTenant to plug in to a myriad of new omnichannel fulfilment solutions, he says.
“JLL have three main divisions: industrial property, hotels, and offices. And in a new climate where people are working more from home and not travelling as much, those offices and hotels are prime real estate that could be creatively repurposed to meet micro-fulfilment demand,” Kyle says. “Think about an underground parking facility that is no longer being utilised – that could become a warehouse that could be fulfilled overnight by a bigger warehouse on the city outskirts. Cheaper warehousing on the perimeter of the city could fulfil such new city warehouses, and then these new city warehouses could plug into innovative new delivery services that meet targeted individual needs.”
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