Home Virtual Reality How retailers can survive the Amazon era

How retailers can survive the Amazon era

by admin2 admin2
15 views
How retailers can survive the Amazon era

Simon is a Director with Cathay Innovation, an early growth venture capital firm based in San Francisco, Paris, and Shanghai; and previously worked at VMware as a Manager in the Strategy & Corporate Development team.

While Amazon’s 2019 Prime Day was riddled with complications, from worker protests to antitrust investigations, the tech giant once again broke records with 175M items sold, surpassing both Black Friday and Cyber Monday combined. In just twenty years, Amazon revolutionized the logistics industry by fulfilling orders directly and offering its fulfillment services to third parties selling on the Amazon marketplace.

This year, more than half of US households will be Prime members. As Amazon continuously pushes delivery costs and times down, consumer expectations keep rising higher. But what does this mean for other retailers?

To survive in the post-Amazon era, the way companies have been storing and delivering physical goods to their final destination will need to change profoundly in the next decade.  Below are some of the key challenges facing the logistics landscape and three predictions for what we can expect to see next. 

The challenge 

Beating Amazon is difficult due to its sheer size, breadth and depth of its warehousing and fulfillment infrastructure and cutting-edge automation. Meanwhile, the typical logistics supply chain has become increasingly complex from transportation of physical goods from manufacturing facilities to last mile delivery to consumers. Further, legacy technology struggles to provide actionable insights due to low transparency, inefficient information flow, and limited automation. 

The gap between shipper’s expectations and logistics providers’ capabilities continues to widen as more of the supply chain lands in the hands of 3PLs—increasing capacity and capabilities but decreasing the shipper’s visibility and control on the process.

Now, also take into account other factors such as the industry wide shortage of blue collar workers and the net effect is that innovation in delivery and warehousing operations is becoming a pressing need.

GettyImages 1161005963

TURIN, ITALY – JULY 09: Amazon boxes of Amazon Logistic Center on July 09, 2019 in Turin, Italy. (Photo by Stefano Guidi/Getty Images)

What’s next for logistics?

Shippers will increasingly need to reinvent their logistics value chain and upgrade various functions, from storage to distribution, as well as leverage new partners that bring innovative technologies and expertise.  

The technology startups that are well-positioned to build lean and effective solutions for the entire industry are those that focus on solving specific pain points including improving, visibility across the logistics chain; speed of delivery; and cost effectiveness of storage and fulfillment.

  •  24/7 tracking becomes table stakes

Over the last few years, the “consumerization of IT” wave hit the logistics industry, meaning business professionals expect enterprise software to look and feel like the consumer apps they use every day – simple, fast, and easy-to-use. 

 Most companies’ legacy infrastructure has challenges with easy tracking or visibility into existing inventory. A new wave of venture backed tech-enabled solutions that marries both technology and execution has emerged to address these issues. 

 Take Shipwell (freight), Stord (warehousing), and Shipbob (fulfillment) for example — these solutions can provide end to end digitized offerings with the speed, reliability, and affordability that are vital to shipping operation teams. 

 While there is still no clear next-gen inventory or warehouse management winner in the US, early signs indicate capacity providers are moving in this direction by offering more solutions such as additional workflow and dashboard tools to their service offerings.

  • Same day shipping will be the norm

 Amazon’s recent one-day shipping announcement is a precursor to where the industry is being pushed. According to Invesp, over 65% of retailers surveyed expect to offer same-day delivery within the next two years.

Many are trying to solve for end-to-end fulfillment solutions to e-commerce players, including warehousing, packaging, fulfillment, transportation, and reverse logistics services. Startups like Deliverr, Shipmonk and Darkstore offer competitive or better solutions in terms of cost and speed, usually controlling supply of storage directly and outsourcing or crowdsourcing delivery. 

Others have gone vertical, such as Cathay Innovation portfolio company and delivery app Glovo, who recently launched their version of a darkstore which is the size of a garage with limited inventory inside cities— but with a goal of guaranteeing 15 minute delivery. According to Glovo’s CEO Oscar Pierre, “Dark stores are a major priority for us, and we plan to open further stores in Barcelona, Lisbon, Milan and Tbilisi within the next year. Being able to deliver within 20 minutes has a massive influence on the customer’s decision. When the delivery time is short and the pricing sensitivity is low, that’s what makes people decide between going to their local convenience store or ordering from the app.”

Delivery speed expectation is experiencing its own “Moore’s law” and is an area we see a great amount of opportunity given the conflux of change needed from physical retail meeting digital expectations.

  • The cost-effectiveness of storage and fulfillment will rapidly improve 

Just as Spotify and Netflix have conditioned consumers to around a $10 price point, retailers and last mile delivery players are doing the same with shipping. This limits the ability for shippers to pass the costs onto consumers, thus forcing vendors to look elsewhere to cut costs.

Several startups are emerging to solve the problem that legacy companies are ill-equipped to solve: enabling retailers to compete with Amazon, respond faster to market needs and contain rising costs.

Flexible, on-demand warehousing has become a good option to save costs and expand footprint, AWS-style. Companies like FLEXE and Flowspace are connecting unused warehouse space and fulfillment capacity with clients that have dynamic warehousing and fulfillment needs, creating a more liquid and efficient market while also increasing visibility into their assets. On the trucking side, companies such as Convoy and Ontruck, (my firm’s investment) are also making sure trucks are being better utilized by matching capacity to empty trucks.

As many shippers (even behemoth’s like Walmart) grapple with creating a profitable e-commerce operation, areas including storage, distribution and fulfillment will be key areas to watch in the coming years.

Parting thoughts

Several technological innovations, from IoT sensors and machine learning models to autonomous robots, are transforming the logistics supply chain. Startups not only have the opportunity to survive the post-Amazon era but help the booming e-commerce industry deliver on its innovation potential.

Read More

You may also like

Leave a Comment