Logistics by definition is the commercial activity of transporting goods to customers. In the past two decades since e-commerce and online shopping has become the norm in most households, we have seen a huge shift in how logistics has affected online retailers versus brick and mortar stores. The online retail craze began in the 1990s when Jeff Bezos founded Amazon. It began as an online book store and later began selling videos, MP3 downloads, software, video games and electronics. It then moved into clothing, food, toys, and jewelry. Although Amazon is the #1 reference company when we think of online retailers, there are many more who have followed in their footsteps such as Zappos, Overstock, and even Walmart making online retail shopping the new norm in most households. Logistics plays a pivotal role in the delivery of goods to customers. We can examine the changes over the years that have led up to this point and see the evolution of logistics in the retail world.
The United States Postal Service has been serving customers since the 1800s. In theory, logistics is the USPS. Companies like Amazon use the USPS to ship their packages. Some people feel that Amazon is monopolizing the Postal Service since they use them to ship the bulk of their orders. If we examine the evolution of logistics from many years ago, huge changes can be seen over the years. From the early 1900s when the first shopping center was built, supermarket chains were brought to life, and catalogs were introduced, logistics revolved around railroads and delivery trucks to deliver goods to shops and consumers. Wal-Mart was founded in 1962 by Sam Walton, paving the way for stores like Target and Kmart.
These types of stores ideas were to make shopping more convenient for customers who wanted to be able to go to one place to buy goods. One stop shopping and convenience at a large store began to take the place of multiple retailers. By the 1970s and 80s, Wal-Mart had revolutionized the shopping experience and went public on the New York Stock Exchange with 51 stores. In the 1990s worldwide procurement for non-food products made its way onto the scene, with many retailers developing import centers to receive containerized shipments. With the tech boom of 2000, e-commerce began to amplify with internet only stores paving the way in producing e-fulfillment distribution networks.
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Online shopping became possible when the internet was opened to the public in 1991. The first online retailer to come onto the scene in 1994 with retailers was called Net Market and Shopping Network. Shortly thereafter in 1995, the world was introduced to Amazon, an online bookstore, and eBay. The newness of online shopping intrigued people and it was considered “in”. LL Bean and Spiegel were stores with catalogs for people to shop online from, similar to years past with JCPenney’s and Sears catalogs. Something to consider with online shopping was fraud. People were concerned that their credit card information wasn’t safe to use online, so people were urged to place orders via phone. In 1994 the prediction was that online shopping would do well and could make at least 5 billion in some years to come. By 2014 e-commerce sales surpassed the $304 billion-dollar mark.
Online shopping has become second nature to most households as apps on phones have made it so much easier than going to the store and pushing a grocery cart up and down isles. It’s how we buy groceries now. What is most convenient is to go onto a store website, make out a grocery list, place an order with a credit card, then pick up the items curbside. Either that or ordering online and the items are shipped to one’s doorstep. Nonperishables are the easier items to ship, however, with dry ice, cold foods can be shipped as well. If we think about Christmas shopping and Black Friday, it’s easy to remember how people used to come out in droves to shop until the wee hours of the morning, sometimes fighting with other people over a popular item.
Now people can wait for Cyber Monday and shop from the convenience of their homes. Then with the click of a mouse, can patiently wait for a package to arrive on their doorstep within record time. We live in a society where people are accustomed to having information at their fingertips thanks to the world wide web. E-commerce logistics systems are in place to ensure customer satisfaction. This includes better communication, reduced costs, effectiveness and on-time deliveries. We have what is now known as “The Amazon Effect”. So much has changed in two decades since Amazon was started. The internet is a must in most homes for shopping as brick and mortar stores are becoming inconvenient, and logistics plays a huge role in this ongoing change.
UPS and Fed-X are Americas two biggest delivery companies. They now have to compete with Amazon who has a fleet of more than 4000 trucks and has reportedly leased more than 20 airplanes to ship customers packages. Amazon dissects and breaks down data from every package it has shipped. The delivery of each package is optimized for speed and efficiency or resources. Amazon has become a large success in online sales due to its logistics empire. Amazon Prime is a $99.00 per year program members can join and receive many items in 2 days. Amazon has 180 warehouses, 28 sorting centers, 59 local package delivery stations, and 65 hubs for its 2-hour Prime Now deliveries. The estimate of the US population who lives within 20 miles of an Amazon warehouse is 44%. The only item we’ve yet to see them sell are cars. Of course they sell and deliver car parts, but actual cars, at least not yet.
Efficiency is of the utmost importance. Robotics has become an integral part of running a warehouse. Robots can’t do everything, and warehouses still need people to work. But automation reduces the need for as many people working in a warehouse as robots can handle many of the tasks. With the approaches taken in digital technology and automation, e-commerce logistics has been influenced greatly as it accounts for just under 10% of overall retail sales today. By the year 2022, e-commerce is expected to account for about 15% ($1 trillion) of United States retail.
E-commerce is expected to become the way to shop for many customers. Customer service and the way it is presented as far as quality has changed due to the amount of people using online shopping as their preferred method. Clients main concerns are to have their purchases come promptly, efficiently and with quality as well as with the most competitive prices. E-commerce is flourishing with the growth of new companies and will continue to move forward as time passes. Logistics has been influenced since the birth of e-commerce.
It is very important for online retailers, logistics suppliers and courier companies to assure that transportation meets their client’s expectations. It is also important for businesses to embrace good technology which will help them make predictive decisions that better help the customers and give the edge over their competitors. Suppliers are the core subject for mail ordering retailers and for retailers trading goods online that want to be sent to clients. Decreasing prices of commodities traded and satisfying customers who need to get their orders swiftly, safely and with reduced shipping costs is critical. Delivering goods and services to customers is key from a marketing standpoint. Getting informed decisions for logistics along with learning data patterns is crucial.
Fulfillment is a primary concern of logistics in e-commerce. An Online marketplace and retailers have to discover the best possible way to take orders and produce products. Smaller companies usually operate their own logistics and supply process because they do not have the power to rent the outside organization. Most large corporations employ a fulfillment service that takes care of the company’s supply needs. Supermarkets have been untouched by the online retail revolution, as e-commerce accounts for a mere 2% of grocery sales. Groceries are a tricky low-margin business.
Food is perishable and storage logistics are complex. Something else to consider are losses in the online industry. Almost 30% of goods sold online are returned for different reasons. This affects logistics as far as the amount of trucks and manpower needed to make returns of goods they’ve already delivered. Store closures and loss of retail jobs is also an issue. Job security is important, so the development of new job skills is imperative as times and job descriptions change. With online shopping comes job openings in the logistics field and AI department.
Supply chain is the support of all marketing. Brick and mortar marketing and online marketing are different in that retail chains have a multi-tier approach. There is the business, one consolidated place for storage, regional distribution centers and personal shops. Consequently, the movement of goods is slow, more product is distributed in the whole chain and the operating cost of keeping different facilities, particularly those shops, is substantial. Clients interact with the retail personnel at the shops and in return, their shopping experience is a happy one. Sometimes no matter how much marketing a company does, it simply cannot survive the online craze.
Examples include Blockbuster video store, Circuit City and Borders book store to name a few, who took a hard hit and had to declare bankruptcy. Urban millennials expect faster delivery of online orders, some even expecting same day service, saving them a trip to an actual store. The instant gratification mentality is a far cry from years past when people had no choice but to shop for items in person and sometimes had to wait a week or more if ordering from a catalogue. Things have progressed nicely as far as wait times for orders. In 2014, e-commerce orders took 8 days from order placement to delivery and now it’s only a 5-day average wait.
Jobs in e-commerce and warehouses almost doubled between 2001 and 2017, reaching more than 1.4 million jobs by the end of 2017, while overall retail jobs rose only 4.4%. Warehouse jobs are growing as colossal facilities are being built far and wide. Another issue putting a strain on logistics in the retail market is getting the many newly hired employees in warehouse settings to and from work, as many do not own a vehicle. Most warehouses work around the clock so as employees work non-traditional hours there needs to be ample transportation available to accommodate them.
There is a very expensive price tag attached to introducing a new transit system. Employers may be encouraged to help fund new bus routes to help with costs to the city. The reason being, that many new warehouses are being built on the outskirts of town where regular routes do not pass. Warehouse employees are the backbone of a successful online retail business so it’s important and necessary to make sure plans are in place to keep up with the demand of getting people to and from work via public transit 24/7, another logistics issue.
If we consider the future of online retail and the role logistics plays, store closings are on the forefront of big changes to come. With stores like Amazon dominating e-commerce shopping, many more warehouses are needed to hold merchandise for shipment. Stores that are distinctive in their own way who offer great customer service, or a particular type of product will remain. E-commerce accounts for about 1/10 of retail spending. If trends continue and that number rises to 1/5 or even 1/3, the effects could be astronomical. In the future, e-commerce could eventually replace the retail industry as we know it. It is a lifestyle change as consumers will spend way less time in stores that were once very popular.
Sadly, sales by department stores have continued to decline faster than the selling space of the actual stores. As fast as brick and mortar stores diminish, warehouses and the increased need for them sky rockets. It makes sense to build logistics centers closer to homes. Land is expensive and large warehouses command a vast amount of space. Builders may be instructed to construct warehouses that are several stories high to save money and utilize space. It stands to reason that the rent will increase. In years to come, as retail spaces become vacant, warehouses will become busier as they fulfill orders to the any online retailers. Amazon and other mass online networkers are dominating and revolutionizing the shopping experience, and logistics and manufacturing have followed suit.
