Reimagining the retail landscape post-pandemic

retail landscape post-pandemic

Christine Miller, Head of Supply Chain Advisory at CBRE speaks to MHD about retailers needing to assess their store networks, strategise, and refresh post the pandemic e-commerce boom, contending with the current supply chain disruption, determining what roles retailers’ stores and DCs play, and harnessing new technologies to deal with the demands of omnichannel distribution.

Need for retailers to assess store networks

Christine Miller is Head of Supply Chain Advisory at CBRE. She says retailers have seen a pendulum shift in consumer behaviour since the COVID-19 pandemic started more than two years ago and the recent return to unrestricted shopping “in store.”

She notes retailers had to react to lockdowns and the temporary closure of their stores by embracing e-commerce and selling their products online. 

From what she’s seen, retailing conditions haven’t returned 100 per cent to how they were pre-COVID-19, and they are not likely to do so. 

“Consumers experienced a lot of benefits during the pandemic,” Christine explains as she comments on how the retailing experience changed for the better for customers. 

“They had increased convenience from home deliveries for a broad range of products through online shopping,” she says. 

“What’s happening now is there’s so much disruption going on in the supply chain that retailers haven’t had the comfort level to think longer term about what their future network strategy should be,” she adds.

Christine says retailers should consider viable strategies now because consumer behaviour is still shifting while costs are also increasing. 

She notes import freight costs have increased as much as four times and domestic freight is increasing due to fuel prices rising. 

She adds that e-commerce penetration rates for Australia are now above 14 per cent and vacancy in warehousing is at a historic low of 1.3 per cent. 

Globally, when e-commerce penetration exceeds 12 per cent and vacancy drops below two-and-a-half per cent, real rental growth occurs, she says. This is yet another cost increase to the supply chain and the distribution network. 

“In addition to cost increases on products, increases are occurring within the distribution network,” Christine says. 

“If retailers aren’t looking at it now, they will be driven to do so just out of sheer need to manage the costs that are now coming into their network.” 

Ways retailers can improve online fulfilment strategies

Christine says retailers should take their first step by defining what their leading market strategy is and building solutions that can deliver on that strategy.

“Do they want to be known for never having any stockouts, or consistent fast delivery, or do they want to be known for free delivery?” Christine says.

“Each of those strategies requires the network to respond differently,” she adds.

She says once retailers define what they want to be in the market, they can then build a cost-effective solution. 

She explains how it may sound simple, but that it’s all about tackling the challenge with an innovative approach such as developing or investing in new technologies that can reduce costs while embracing new ways of looking at operations in the supply chain.

“There are some exciting and more reasonable Capex solutions that cater to online pick-and- pack operations,” Christine says. 

“I think there is value in looking at new locations for both retail as well as distribution taking a holistic approach.” 

Christine says CBRE Supply Chain is currently working with the owners of more than 100 shopping centres across Australia to bring innovative solutions to retailers. 

The opportunity to have logistics and order fulfilment operations in these locations is a real opportunity to retailers to consider doing things differently, she says.

“That type of innovation can be interesting to a retailer because they might be able to serve customers from a location where they don’t have a retail store, or if they do have a retail store, expand on their online business and scope of delivery options to their customer base,” Christine explains. 

She says it’s all about considering ideas and innovation when designing a network and ensuring it specifically matches the market strategy.

Solving supply chain problems

Christine says if it were easy to build a nimble and flexible supply chain, everyone would have one.

“It takes a lot of analysis; a lot of work, and it absolutely takes a mentality of continuous improvement,” Christine explains. 

“I think the other challenge right now that makes this particularly difficult is there’s so much disruption in the supply chain.” 

She says having a fresh perspective on network strategies, as well as being innovative, requires retailers to focus outside of managing day-to-day challenges, and look for solutions that manage costs while meeting consumer expectations on products and services.

“I think building a resilient, nimble, flexible supply chain network is a difficult one,” Christine says. 

“It requires a view towards having that clear market strategy and having the systems that support that.” 

Globally, when e-commerce penetration exceeds 12 per cent and vacancy drops below two-and-a-half per cent, real rental growth occurs. This is yet another cost increase to the supply chain and the distribution network.

She notes one of the challenges that many retailers face is having inventory visibility wherever it may be in the supply chain. She says it’s a foundational requirement to then adapt to the market conditions, and to know where the inventory is and to manage where it’s going. 

Christine says in previous times, technology wasn’t a priority whereas now it is. 

Determining optimal roles for retail stores and DC networks

Christine says traditionally a warehouse or distribution network would hold inventory and deliver it to retail stores where customers purchased the items and acted as the outbound delivery, or as what is now known as “last mile.” 

“That role has now changed because retail stores are using their inventory to fill online orders for a customer who might not come through the store,” she says. 

“Suddenly what was in previous times viewed as a pure retail location now actually has a role in the logistics and the distribution,” she adds.

“And the same goes for the warehouse. The warehouse used to traditionally just move products out to retail stores. 

“Now they’re picking and packing orders that then go direct to the consumer. So those operations require different spaces, different technologies, different skills in the labour force.” 

Christine says this hasn’t happened by accident and that it all needs to be planned. 

She notes retailers need to figure out what their growth trajectory looks like in the post-Covid retail world.

Overall retail sales are increasing, but online and store sales are growing at different paces, she explains.

“And that means retailers need to make sure all the assets they have in their network, whether it’s a distribution site or a retail store, can play a role that helps them serve as customers with the timeliness customers demand,” she says.

“And within a cost that both the retailer and the consumer find acceptable. The challenge is redefining how to use the stores, and how to use your warehouse and distribution network to do things differently.”

Technology as solution to disruption

Christine says there’s some great technology that can help answer these difficult questions. 

She notes CBRE uses several different tools. 

“We have our network design tools that can look at cost and service delivery elements, and we can enhance those findings with a retail analytics technology called Pathzz,” Christine says. 

“Pathzz can specifically overlay consumer behaviour onto these more traditional network elements that we look at,” she adds. 

“I think there are some great tools that are available to help develop a refreshed network for retailers. We’re not trying to solve a new problem without new tools. There is technology that helps get to the right answer.”

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