21 Apr How Online Food & Beverage Companies Can Handle the Upcoming Growth in Fulfillment
The eCommerce transformation is hitting pretty much every form of retail, though not all at the same rate. It’s an example of the William Gibson dictum, “The future is already here; it’s just not very evenly distributed.”
Books are the eCommerce ur-category. In 2012, the eCommerce share of the book market was 30%. Projected eCommerce share of the book market in 2017: about 50% (source: FTI Consulting). Other categories show less penetration, but all are growing similarly quickly. Even food & beverage, a relative laggard, is growing fast: over 21% a year by some estimates (source: BI Intelligence) – well in excess of brick & mortar growth rates.
These growth rates mean that the eCommerce present for books is likely to be the eCommerce future for everything else, at least to some degree. In the image below, based on Euromonitor data, compare the real (inflation-adjusted) growth rates of brick and mortar and eCommerce grocery sales. The differential rates, played out over a few years, means a huge increase in online share of the total market. While the online share of the food & beverage market may never hit the 50% of the book market, estimates of online share of the grocery market in 2025 are as high as 20% (FMI-Nielsen).
I was at the Shoptalk show in Las Vegas not long ago, where one of the innovations that caught my eye was an autonomous delivery robot (big enough to hold two bags of groceries) zipping around the exhibit halls. Add in some other recent technological gee-whiz stuff (Amazon Go, anyone?) and it’s clear that the fulfillment end of the food & beverage business is seeing some major shocks. How should you respond, in order to profitably meet your customers’ rapidly changing (and rising) expectations?
At a risk of repeating a lot of what I wrote about when discussing the challenge online apparel companies are facing when dealing with the changes in their market environment [link], it comes down to three basic steps:
- First, you need to get visibility into your fulfillment process
- Next, you use what you learn to get control over your fulfillment process
- Finally, building on the first two steps, you can transform your shopping cart by developing a core competence in analytics-driven fulfillment
It’s a truism that you can’t manage what you can’t see. So visibility into your fulfillment process is critical. Very few companies have a good handle on visibility into the fulfillment chain; for parcel and LTL shipments for direct-to-consumer and direct-to-retail shipments, you are dealing with external partners outside of your four walls (and the systems you use to manage operations within them). You are often dealing with more than one partner, and for every one of them, there could be a dizzying array of services and modes. These challenges will only increase in complexity and intensity as more of the food & beverage market moves online, with an extra degree of difficulty for anyone dealing with perishables.
Getting the fulfillment data that serves as the foundation for visibility isn’t particularly hard – your carriers will give it to you and even just the invoice file contains a wealth of rich data. The hard part is putting that data in a useful form, especially when it is coming from multiple carriers each using its own proprietary file structure and service designations. Getting past the Babel of different names and formats requires normalizing all the data – mapping it to a single, common standard.
With the foundation – the normalized data – in place, you can build on it with descriptive analytics, to diagnose the current state of your fulfillment operations. This part of step one shows you all sorts of critical information, such as your actual cost to ship an individual order or product line. Further, discover what services are costing your company the most and how much is going by ground and by air. Don’t forget accessorials – they can dramatically increase the costs you are paying. The point of this exercise is to determine what better shipping choices can you give your customers (or even to a certain customer segment, for those practicing fulfillment chain segmentation) at better cost.
Now you can move on to the second step and gain control. From basic descriptive analytics, useful for diagnostics, you can move on to advanced analytics and modeling, to determine where better is possible in your fulfillment operations. Better can take a lot of different shapes, including carrier changes, mode shifts, or identifying the ideal locations for inventory.
On to Step 3, creating a core competence in analytics-driven fulfillment. What do we mean? Analytics-driven fulfillment is the process of infusing intelligence throughout your fulfillment operations, using real data and concrete logic to drive decisions and inform operations. The best thing is, this practice can become a process of continuous improvement, based on “embedded analytics” that allow you to make intelligence the foundation of decision-making throughout the fulfillment chain, from the shopping cart to the customer’s hands.
If any of this makes sense for your company, you might want to check out some of our other thoughts – here’s a good place to start.
As ever, we’re always delighted to hear what you think. How is your company looking to grow its share and improve its customer experience online? What do you see coming down the pike in the online food & beverage industry? What are your hottest of hot-button issues?