Three 2018 Supply Chain Resolutions for Ecommerce Retailers In Their Battle Against Amazon
By: Dylan Hogan
The new year gives us an opportunity to reflect on the past and look to the future with a sense of optimism.
2017 was an exciting year to be an ecommerce professional. Amazon was in the news regularly, with no bigger story than their June acquisition of Whole Foods. Big brands like Nike ramped-up direct-to-consumer selling efforts and traditional retailers continued to innovative in order to keep pace with the fast-changing industry.
Year-over-year Ecommerce sales grew close to 13% and represented approximately 9% of total retail sales in 2017. Last year brought us the American “retail Armageddon” with major retailers closing over 5000 stores, casting a cloud over certain industry segments and dragging down sales at some brick-and-mortar ecommerce programs.
2017 saw an ecommerce industry dominated by Amazon on almost all fronts, including Holiday, when they seized half of all Black Friday sales in the United States. Walmart’s core businesses started gelling with their six digital acquisitions, forming a compelling platform that should challenge Amazon in 2018 and years to come.
As The National Retail Federation’s 2018 Big Show kicks off in New York, it is a great opportunity for ecommerce professionals to start the year with some New Year’s resolutions. This blog focuses on three from the supply chain that retailers should consider adopting in 2018.
1. Develop More SaaS Supply Chain Partnerships
It is table-stakes for retailers to continually invest in their ecommerce supply chains. Deploying inventory closer to shoppers, offering faster deliveries, and integrating online order pickup-and-return at stores are trends across the industry.
This gets challenging when Amazon continues to out-spend and out-innovate on top of the most sophisticated ecommerce supply chain ever created. Amazon now operates over 330 fulfillment centers, guarantees 2-day delivery on over 50 million items, and serves approximately 90 million Amazon Prime households in the United States. Amazon’s ability to leverage supply chain assets will only accelerate as customer buying patterns shift to mobile and voice, both sales channels where they already have considerable advantage.
A good partnership benefits all.
Retailers can compete by partnering with technology platforms that offer modernized, cloud-based, software services, and integrating them into their supply chain.
These software-as-a-service (SaaS) solutions can be delivered at lower cost than developing similar capabilities in-house because they rely on concepts that did not exist a few years before, including:
- Cloud-based computing, which has matured (ironically) through advances in Amazon’s AWS capabilities
- API-based integrations, which enable more flexible and faster integration between systems and trading partners
- Subscription-based pricing, which prices software at a much lower rate than equivalent enterprise or legacy software due to multi-tenant provisioning and lower setup costs
If your retail IT portfolio relies heavily on traditional EDI processing, file-based data exchanges, and monolithic applications with green screen interfaces, implementing more SaaS-based partnerships should be one of your supply chain resolutions for 2018.
2. Apply Advanced Data Management Techniques to Business Operations
Data has become the new currency of the digital economy and retailers who collect, analyze, and use data effectively can generate strategic advantages. Amazon has been a data-driven company since its early days. Walmart is also quickly catching up with its plans to invest in cloud computing and AI technologies.
The quantity and richness of operational data only continues to rise as retailers become more digitized. By the year 2020, there will be 20.4B IoT devices in the world, many of which will be located in retail stores, delivery trucks, and warehouses across the supply chain. Ecommerce retailers therefore need to start:
- Weaving this data into business processes that power the supply chain
- Using data solutions that maintain data purity and standardization
- Deploying solutions that do not restrict data flow with unnecessary and outdated expense models like per kilo character or per order fees
- Investing in modern data management platforms that help them turn raw data into the grist for use cases and pattern recognition software
If you are still running systems that reflect different versions of the truth, if you have multiple product or customer data sources, or if it simply takes too long to get data cleansed and harmonized, implementing advanced data management techniques should be one of your supply chain resolutions for 2018.
3. Develop a Best-in-class Drop Ship Program
In a recent Retail Dive consumer survey, 65% of retail customers said they used digital information to influence their purchase decisions. Unfortunately, many ecommerce purchases are now either transacted exclusively on Amazon or end on Amazon for a variety of reasons, including a lack of online assortment at their favorite retailers.
Amazon’s online assortment lead will widen as they expand their third-party marketplace, enter new markets like apparel and furniture, and acquire additional brick-and-mortar retailers. This will make it even harder for capital-strapped retailers to compete for less-loyal, more digitally enabled customers.
Ecommerce retailers can stay competitive by expanding assortment online and fulfilling customer orders via drop-shipping.
This model, where retailers transfer customer orders directly to suppliers, who then ship goods directly to customers, is not new. Drop shipping has been around for as long as there have been catalogs to mail. What is different now is a “do or die” need for retailers to embrace the model and invest in the processes, partnerships, and technologies required to do it right. This means:
- Choosing a platform partner that offers SaaS-based pricing and advanced technology such as API-based integration and cloud-based architecture
- Incorporating data from all points in the organization and across the supply chain to create a truly integrated data-driven operation
- Leveraging store assets for in-store pickup-and-return drop-off to offer compelling solutions to customers where Amazon is at a disadvantage (at least for now)
- Ensuring all internal departments and external trading partners understand the strategy and have the tools, incentives, and processes in place to achieve success
As 2018 begins, I am excited to join the Dsco team to help retailers evaluate, make, and keep these New Year’s resolutions. Dsco improves how retail partners make operational and strategic decisions through a SaaS-based approach to supply chain integration and data management. We are in the business of helping retailers harness their supply chain data to serve their customers better with extended online assortments and optimal supply chain strategies.
Ending This New Year’s Blog with a Sense of Optimism for 2018
While Amazon continues to dominate the industry, they only account for less than half of ecommerce sales, and less than 5% of total retail sales. There are plenty of ecommerce retailers winning competitions every day for the right to serve online customers. It is often said that time is our greatest asset, so no time like the present for ecommerce professionals to adopt these resolutions and improve their supply chains in the new year!