Near Instantaneous Deliveries: Strategies for Swift e-Commerce
At the start of 2019, the market trembled before the so-called “Amazon Effect” which allegedly pushed many physical stores to close down permanently.
However, retail businesspeople didn’t stay idle, rather they pooled their resources towards innovation and largely managed to contain their losses in the wake of Amazon and the new delivery expectations that the tech giant created in customers across markets.
Now, with the global spread of COVID-19, markets quickly changed once again. The definitions of fast delivery, inverse logistics capacity, low costs and even the “Prime” service, all evolved exponentially in response to the pandemic. Halfway through last year, news hit that Amazon was investing more than 800 million dollars to expand their logistics infrastructure, in hopes to prepare for an e-commerce centered future. However, not even Amazon knew just how fast that future would arrive.
Nowadays, those same headlines showcase deliveries happening in mere hours, no matter the time of day, around US cities such as Philadelphia, Phoenix, Orlando and Dallas, which now benefit from this revolutionary service. How long until the expectations created by this new delivery speed reach Latin America and the rest of the world? What can we learn from how Amazon achieves this promise of increased delivery speed? Amazon keeps its place at the top through two concrete strategies that we will explore today, and learnings from these same strategies could give other businesses an advantage.
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It’s important to clarify that the logistics vanguard seen in the last few years not only came about due to the two strategies we will mention shortly, but due to others as well. The development of fast digital platforms, streamlined paying, digital banking services, urban growth and internet availability have, each in its own way, changed consumer culture forever. Last mile problems, particularly the issue of slow deliveries, were in part solved with distribution centers that are typically established in the outskirts of cities. Location costs are driven down and traffic remains generally fluid, but they also increase the distance between product and consumer, which ends up increasing prices. If we factor in the ever-changing personnel, the perceived advantages of these centers are also an important factor that impacts delivery speed.
With this in mind, micro-fulfillment centers and darkstores were born, both turning into crucial allies in optimizing costs. Both strategies are relatively new to the market and can be described as small urban logistics centers that keep delivery times short. Both concentrate in reducing transportation costs and warehousing problems, which is why they could be confused as identical strategies, but each has its own unique strengths that seek to benefit supply chains.
“A Micro Fulfillment Center is small by design, getting from 600 or 800 m2 to a maximum 3000m2” explains Karolina Pulido the CEO of G.I. Eicom. She notes, “Usually they are laden with automatic processes (…) robots and A.I. are implemented with heavy flexibility.” Micro fulfillment can occupy a variety of spaces, from areas inside traditional distribution centers to portions of physical retail stores, as long as automatics are put in place to ease and speed up item selection, package preparing and warehouse work in general. If applied properly, micro fulfillment can have miraculous effects on delivery times, sometimes allowing a package to be ready in less than five minutes and delivered within the hour. This is why the technique was first implemented by supermarkets and similar stores, because groceries are expected to arrive immediately.
“On the other hand, Darkstores are also small-scale urban logistics centers (…) The space they occupy however, unlike Micro Fulfillment, is a lot more spacious sometimes needing to convert a whole traditional retail store into a Darkstore” says Pulido, clarifying the main differences between the two concepts. Because of social distancing rules, many stores that could not continue the physical sale of goods transformed their premises into darkstores to increase their capacity to respond to online sales. These spaces don’t need to have automatic processes in place. Their interior is more akin to a regular store, however the placing of items and shelves is designed to increase effectiveness and not sell products directly to customers.
The key aspect of both methods is a central location inside an urban environment, to both shorten delivery distances and be complemented by alternative delivery strategies such as Click and Collect, Hub Lockers, Trunk Deliveries, Delivery Drones, and others. For obvious reasons, we cannot expect regional stores to implement these two strategies at the scale Amazon has done, however knowing that they exist and that optimizing deliveries to this point is actually possible, could give a valuable advantage to businesses looking to innovate, even inside their own communities.