Intralogistics for the Future of Shopping

EinkaufswagenHow are we going to shop in the future? To generate some insights into the developments in retail, internet marketplace operator Ebay enlisted a number of experts to create a study called “The Future of Retail”. Even though the results are announced for the end of 2012, some of the theses were published in advance.

The experts brought together by Ebay agree that there will be significant changes concerning retail stores. According to them, conventional stores will almost disappear entirely, giving way to showrooms. These showrooms will allow customers to get their hands on the products and try them out, but not take them home. Instead, customers will be able to order the products they want by using QR-codes or order terminals and have them delivered directly to their homes.

Assuming that these visions would become reality, how would it affect the intralogistics of the companies involved? Here are three points that intralogistics insiders might find most relevant:

1. No more stock-keeping in retail stores

Retail stores that get turned into showrooms won’t need a conventional warehouse anymore. Producers would deliver new products to the showroom, set them up for the customers to see, and also remove phased-out models and take them back. In case a customer orders something, the product would get shipped from the producer’s distribution centre directly to the customer. The stores would then benefit from lower costs, but the producers will most likely insist on getting a larger profit margin, because they are contributing more than before.

This poses the question of how to implement this concept. In order to get their commission, showroom operators would need to prove, that the order did in fact originate from their store and make it traceable. However, the privacy of the customer must not be compromised. This is a point where more careful consideration will be necessary to make the concept work.

It is going to be interesting to see how those retailers, which now only sell over the internet, will react to this development. Are they going to continue focusing on online and try to defend their market shares with cost advantages? Or will they open their own showrooms, attempting to leave the territory they’re used to, the internet? After all, internet retailers already have the infrastructure in place, necessary to deliver directly to customers. By setting up their own showrooms, they might be able to poach in the preserve of the offline-retailer (turned showroom operator).

Scanner2. Single-piece order picking instead of pallet order picking

All the products that producers and intermediaries are sending to retail stores by the pallet or carton these days, would need to get shipped directly to the consumers’ households in the future. This requires a large change in intralogistics. Producers and intermediaries would need to retrofit their distribution centres to work efficiently in single-piece order picking.

The future laid out in the study is not going to turn into reality overnight; and certainly not everywhere at the same time. There will be a transition period of several years, in which the distribution centres will most likely adopt multi-channel distribution solutions. This would enable them to deliver to conventional retail stores as well as handling orders coming in from the newly established showrooms.

3. Further increase in returned goods

Many internet retailers are already struggling daily with truckloads full of returned items. In the future this will also include products that customers today are still returning in shops. The logistics to handle the returns will have to keep pace with that increase, so producers and retailers will have to look for more efficient methods and technologies.

However, retailers do have reason to be optimistic in this regard. Customers, who ordered from a showroom, after trying out the product and talking to salespeople, will be less likely to return the item than pure online shoppers. Nevertheless, returned items will continue to lower the retailers’ profits significantly.

Are we really going to shop this way in a couple of years or were the Ebay experts just stabbing around in the dark? One thing is for sure: the customers are going to decide which retail concepts will prevail in the future. Technological progress has no respect whatsoever for big names in the industry and customers’ loyalty is as low as never before. Companies need to be prepared to question their business model and if necessary adjust it to a changed environment.

For people working in the intralogistics of the affected companies, it is important to recognize these trends before it’s too late. Then they will be able to make the right decisions. Those however, who don’t plan for the future, won’t be able to participate in it.

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