Getting Closer to the Consumer: Effective Strategies for Retail Success

Anyone running a successful business knows the critical importance of making the wants and needs of their customers their first priority. General Merchandise (GM) retailers have been specializing in this forever. You want a sky-blue, full-suspension, 30-gear mountain bike with a child carrier? No problem, you got it. You want a string of solar-powered lights that twinkle and pulse to show off your garden at night? Sure, here ya go. You want a special form so you can bake a cake in the shape of a 17th century pirate ship? Right. How many?
And no matter what your specific wishes might be, GM retailers are following the same simple rule to make them come true: Customer First
This rule is about much more than just offering a wide range of products. It’s a special mindset, a proactive approach to meet long-term wants and needs. However, those customer wants and needs are never static ― they are constantly changing. And current circumstances have only accelerated those changes.
New circumstances, new challenges
The growth of e-commerce has been a trend for some time and most GM retailers have been adjusting their supply chain accordingly, including omnichannel strategies to maximize inventory efficiencies. But when the pandemic hit, customer options like click & collect suddenly advanced from “nice to have” to “absolutely necessary.” According to McKinsey, ordering online and picking up at store became the fastest growing omnichannel ordering model, with growth of anywhere from 40% to 70%, depending on the product.
On the other hand, the pandemic possibly created a slight pause in another major consumer trend: urbanization. But there is little doubt as the world recovers that it will again pick up speed. By 2030, 60% of people will be living in urban environments. As this happens, the cost of servicing customers in cities will continue to increase. More people shopping in denser areas with higher expectations for delivery speeds and shopping options creates quite a new challenge for GM retailers.
Figuring out how to get closer to the consumer
Retailers have recognized these developments and are feeling the pressure to act. Many are looking to shopping centers for solutions. Counterintuitive as it may seem with so many recent closings of physical locations, shopping centers retain value as sizable locations that are close to consumers.
Some operators are already conducting trials, initiating shared logistics services that enable retailers to offer home delivery and click-and-collect options with pick-up instore or curbside. This concept is known as shopping-centers-as-a-service.
Amazon is currently taking this a step further by purchasing disused shopping malls and turning them into fulfillment centers. Between 2016 and 2019, Amazon converted around 25 shopping malls, according to an analysis by Coresight Research. But clearly this is not a viable option for most retailers.
Retailers with existing storefronts have been amping up their click-and-collect efforts to take advantage of their presence near their customers. Another variation on that same theme are dark stores, which fulfill orders directly to consumers out of a warehouse or vacant store. Similarly, urban/metro e-commerce (or “metro hubs”) focus on high demand items that can be fulfilled quickly as a subspace within an existing distribution center or smaller, pop-up facilities.
Different needs, limited choice
But what’s the best solution? Well, that’s the thing ― there is no single best solution. There is such a wide variance in the size of GM retailers and the type and number of items they sell that “one size fits all” is not remotely possible.
Still, GM retailers are searching for the right solution for them. And as the search intensifies, more and more start-ups and single-solution providers are emerging to offer their ideas. Some of them are truly innovative, and at first glance, what they are pitching can be enticing.
But a closer look typically reveals that they a very limited amount of actual answers in their portfolio. The consequence: Their business model is to bend the GM retailer to what they offer rather than what the retailer needs, which is ironic: GM retailers, whose mantra is as you recall “customer first” are now in a position where their own wants and needs are made secondary (or worse).
Closer to consumer by putting the retailer first
The most important question should be: What do GM retailers really need and want in times of changing circumstances and challenges? A partner who can provide a variety of business solutions and who can (even more importantly) help navigate through all options. A partner with the willingness to provide solutions that best match the retailer. Whether that might be click & collect, a dark store, a metro hub — or something else entirely.
To get closer to their consumers, retailers need to use every advantage they have. That can be the real-estate they already own with existing stores. But whatever it is, they need to look to optimize the use of all assets by putting their own needs first.
Maybe the most obvious solution for a retailer to get closer to the consumer is to take advantage of the physical locations they already have. Generally, any storefront that survived the recent recession is accessible to a viable number of customers. Those same customers are no doubt also making online purchases, so why not fulfill some of those orders from those locations.
The concept of micro-fulfillment (using the inventory at a store location to fulfill online orders) is not new. Grocery retailers have been quick to embrace it. But now GM retailers are beginning to see the advantage.
Micro-fulfillment is a great entry point for retailers to get closer to consumers. With some relatively straightforward software add-ons or upgrades, retailers can set themselves up to manually pick online orders from in-store inventory. A step up from there could be adding pick carts that staff can roll to pick from inventory in the backroom. And finally, full automation with a full goods-to-person solution like the Dematic Micro-Fulfillment solution installed in the backroom of the store.
Dematic is currently working with a retailer that is taking its own unique approach. They have installed a goods-to-person solution in their backroom that, as a first priority, replenishes only in-store shelves during overnight hours. Labor challenges made it their most critical issue. In the future, they will be using the solution to fulfill click-and-collect and direct-to-consumer orders, which is usually the first priority for automation. The takeaway here: The retailer implemented what works best for them.
By thinking a little more strategically, retailers might opt for additional options for fulfilling online orders to get closer to consumers. Perhaps it’s still installing automation in the backroom of an existing store, but instead of only fulfilling orders for that particular store, it would be more of a region hub for a certain area. And instead of stocking it with most of the inventory for a store, only stocking it with a few, high-demand items.
These metro hubs are smaller than regional distribution centers and therefore much easier to tuck into existing urban buildings to drastically cut down on delivery times for direct-to-consumer orders. Metro hubs can also be a great option for click-and-collect orders.
It’s a slightly expanded approach to traditional fulfillment, which focuses on operating within the four walls of one (typically enormous) warehouse or distribution center. Networked logistics is more about a network of many points of inventory optimized to meet consumer expectations — selection and delivery expectations that Amazon has created (and continues to advance).
There are further details to consider when fulfilling online orders as efficiently as possible. If you are a retailer that already has underused real estate assets, such as closed stores in shopping malls, these may be fantastic opportunities for repurposing into fulfillment locations. Or other retailers and owners of shuttered shopping locations may be willing to provide you with distribution space — shopping-centers-as-a-service.
Mall owners across the world are beginning to provide this type of service for their tenants, starting with manual, software-driven solutions and adding automation as growth occurs. Many see this as a way to stay competitive with the likes of Amazon, which has been buying up shuttered department stores in North America as part of their strategy to get closer to consumers.
After location decisions are made, then there’s the matter of identifying the technologies best suited for providing the automation. For example:
- AutoStore™ storage and retrieval systems are extremely space-efficient and highly adaptable for installing into challenging spaces. Dematic has seen an especially high interest for AutoStore-based solutions in Europe where space close to consumers is typically at a premium.
- Autonomous Mobile Robots (AMRs) are another excellent option. AMRs are industrial robots that lift and transport materials such as pallets, navigating themselves by reading QR codes and sensing obstacles. They move loads more quickly and are more adaptable, especially in choosing routes and avoiding obstacles.
- Dematic software can be a viable solution all by itself. Dematic Warehouse Execution Software (WES) and Warehouse Management Software (WMS) can manage fulfillment processes dynamically, adapting to current and forecasted workflows and reacting in real-time to critical events, such as equipment availability and order updates.
What’s next for retailers?
Well, the reality is that there is no single path that will accommodate all retailers — especially GM retailers. There is just too much variance. That’s why the best advice I can give you about finding your right solution is to work with an expert that can, first, provide you options. Some solution providers, only have a single solution. (If all you have is a hammer, everything looks like a nail.)
The trends toward retailers needing to get closer to consumers are fairly straightforward, but figuring out the best way to do it is not. You, as a retailer, are always putting your customer first. Why wouldn’t you expect the same when you’re the customer?