Before the pandemic, e-commerce sales were steadily increasing, but when the world shut down in March 2020, that steady incline took a sharp turn upward. Online sales jumped 14% in the first year of the pandemic, bringing total annual sales to nearly $900 billion. However, that is just 13% of total retail sales, and brick and mortar sales have been rocketing back. Growth in physical retail sales is now outpacing e-commerce growth.
However, even while consumers are back to shopping in stores, their demands and expectations of the shopping experience have changed. They want more options – buying online with in-store pickup, same-day or next-day delivery, etc. For retailers to keep up with the changing landscape, they are going to have to adapt. And that likely means finding ways to provide excellent e-commerce and in-store options.
To better understand the pandemic’s impact on the retail sector and how it changed e-commerce shipping and fulfillment, DAT Chief Scientist Chris Caplice spoke with Brent Beabout, retail guru and president of Quiet Platform, in an episode of the Freightvine podcast from DAT iQ.
The impact of the pandemic on retail
The proliferation of ecommerce during the pandemic brought to light a number of challenges. Retailers, even the large, successful chains, realized they needed to provide more options to their consumers while consumers demanded faster delivery times.
“Amazon realized they had to get more local with their customers … because people want certain things fast,” Beabout says. “While Walmart realized that they had to offer a broader selection than they did in stores, which is the ecommerce experience.”
However, to do these things, it takes people and capital.
“As e-commerce penetration has gone up and up as a percentage of sales in all retailers – what’s happened is most small and midsize retailers just cannot keep up,” Beabout says. “It’s a capital, talent-intensive business, and most of them don’t have the balance sheet to pull that off, so the big guys are really capitalizing on that because they have all of those things, which no one else does.”
Midsize and small retailers will have to adapt
Because ecommerce is not going away, mid- and small-sized retailers are looking for ways to compete.
Beabout points out that of the billions of retail shipments that go out per year, 30% of those have to travel cross-country, meaning inventory is on the wrong coast. Predominantly, those shipments were being carried by the large, national parcel shippers. As they increased prices and large retailers added options for two-day delivery or free delivery services, small retailers just couldn’t keep up.
Therefore, one way for them to do that is through consolidation on the back end. This will allow them to work together to create their own economies of scale by becoming more efficient in terms of distribution, fulfillment and shipping, which are typically competitive advantages for larger retail businesses.
“The whole play here is about aggregation and creating economies of scale,” Beabout says. … “This allows (those retailers working together) to stay in business for the long term.”
Give consumers what they want
Additionally, this consolidation on the back end will help smaller retailers give customers what they want – options and fast delivery.
“The proliferation of people helping the smaller guys make it work – people like Shopify, people like Quiet Platform, that allow the front end and back end to work at some scale, that’s going to be the future,” Beabout says. “There’s plenty of storefronts out there to operate out of … and then using us and other folks like us to actually operate the back end for ecommerce and shipping, that’s the future down the road.”
This will also include “showrooming,” or having a storefront for people to come in, shop around, get the look and feel for the products, but then having them delivered the same day or next day. And again, the small-to-midsize retailers will not be able to do this without consolidating in the distribution center and last mile.
For the full conversation, including how Beabout’s startup company is helping retailers adapt and thrive in the new normal, listen to the full episode of this DAT Freightvine podcast.