07 May 2014
Fulfilment has always been the last hurdle of the e-commerce world. Shipping products to individual residences can be extremely expensive, and naturally that cost gets passed on to the consumer, which is one of the highest causes of shopping cart abandonment in online retail. Even worse, delivery times rarely seem to coincide with the customer's actual availability, creating a general hassle that pushes many people away from the online shopping world.
Several ideas have been floated and tested to solve this problem, but the most promising possibility so far seems to be the concept of centralized distribution centres. Essentially, companies ship purchased products to centralized locations scattered throughout major metropolitan areas which act as pick up points for customers to visit whenever is convenient for them.
At first glance, of course, this sounds quite a lot like the 'big box' retail store model that has been the latest rage in brick and mortar retail, but there are a few key differences. First of all, overhead is extremely low for the distribution centre, as they don't need to keep a large area open for customer usage. Second of all, for the customers, there's no need to hunt around through a store area, as their package is already catalogued and marked, ready for pickup. No hassles about stock, or price comparisons, or any of the hassles that make retail shopping in a big box store frustrating.
In fact, Planet Retail, an industry analysis firm, recently released a report entitled "UK Click & Collect: retail fad or future of the high street?" forecasts that the number of shoppers in the UK who use these types of distribution centres to complete online purchases will more than double from the current 35% to 76% by the year 2017 - quite a strong recommendation. Currently, the United Kingdom leads the world in the use of these types of services, with only 13% of customers in the United States using similar services, and less than 5% in Germany.
To add even more weight to the phenomenon, online retail giant Amazon is currently experimenting with similar delivery centre options, although they're going to have their work cut out for them, as most of the 66% of UK retailers who currently offer click and collect services already have brick and mortar store locations that can be doubled up for use as distribution centres. However, considering Amazon has a staggering amount of warehouse space already carefully centrally located in major metropolitan areas - not to mention nearly unlimited capital - the competitive advantage may swing back in their direction quite rapidly.