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Does Ecommerce Spell Epocalypse?

“Disruption” is too weak a word to describe what ecommerce is doing to American retailing and supply chain management.

For some it feels more like an apocalypse. Shopping malls are displaying more gaping holes where stores once stood. Payless ShoeSource, Radio Shack, HH Gregg, Wet Seal and Sports Authority have gone the way of the dodo bird and passenger pigeon.

Other retail giants are tottering. Macy’s is closing 15% of its stores this year. The management of Sears/Kmart has warned that the company may not survive. Neiman Marcus is looking for a buyer.

Retailers who have closed or almost completely eliminated all of their physical locations and say they will only continue to sell products online count among their number The Limited, Bebe, Kenneth Cole, BCBG and American Apparel.

Chains shedding stores to slim down in hope of surviving include JC Penney, Abercrombie & Fitch, Guess, Crocs, Chico’s, GameStop, CVS, Gander Mountain and Staples, which just announced that it is looking for a buyer.

In February-March 60,000 retail jobs were shed, and about 3,500 stores will be shuttered this year.

But while traditional brick-and-mortar retailers drown or struggle to find their footing, ecommerce keeps moving from strength to strength, led by the massive online juggernaut called Amazon.com.

Amazon also appears to be pursuing a strategy to achieve domination of the logistics industry serving not just its needs, but all online retailing both in the United States and abroad.

The number of online shoppers has grown by nearly 20 million between 2015 and 2016, the National Retail Federation reports.

For retailers the challenge is to learn how to forge successful strategies for survival – quickly, according to NRF President Mathew Shay.

“The business model has to evolve quickly to meet the needs of consumers,” he says. “It’s clear that many companies are working as quickly as possible to transform themselves, but not all of them are going to make that jump. It’s a highly competitive environment.”

Logistics Makes It Happen

So far no one has been able to challenge Amazon’s mastery of the supply chain, from sourcing products to organizing them for distribution to delivering to the customer’s door.

The Fulfillment By Amazon (FBA) program reaches beyond vendors that sell their products on the Amazon.com website. With deployment of its own fleet of planes, ships, over-the-road trucking and package delivery services, Amazon is now directly competing with UPS in the U.S.

The company is even carving out a logistics presence in China, where it is taking on Alibaba’s distribution network on its own home ground.

Jeff Bezos is betting that technology will give FBA its competitive edge. After Amazon acquired the No. 1 robotics supplier Kiva in 2012, that company stopped selling to anyone outside of Amazon.

Given Kiva’s near-total domination of logistics robotics, third-party logistics providers had to wait while other robot manufacturers geared up to fill the gap. Kiva’s acquisition allowed Amazon to steal a march on 3PL competitors to FBA and even with robot suppliers making progress, those companies are still scrambling to catch up (AA, 7-15-16, P. 1).

But it is vital for Amazon’s competitors to learn to apply every type of technology available to succeed, according to the authors of the U.S. Roadmap for Material Handling & Logistics: Version 2.0 released by Deloitte and MHI earlier this month at the ProMat trade show in Chicago.

“Whether it be robotics, automation, IoT or drones, these leaders understand that the battle for the lion’s share of the consumer’s dollar will be fought supply chain vs. supply chain,” they said.

Next-generation supply chains will be required to provide anytime, anywhere delivery to customers and will therefore be required to be always-on. As a result, they will be digitally connected, with all of their links synchronized, the report points out.

“Retail stores, ecommerce sites, inventory control points, distribution and fulfilment centers, upstream suppliers and manufacturers – all will be aligned to the same drum beat of consumer demand in near real time,” the researchers predict.

They recommend that you start your planning now by developing a forward-looking view of what your supply chain should look like at least five years from now.

“Work with sales and marketing to understand growth projections by product, channel and region,” the Deloitte MHI researchers suggest.

Consumers will continue to demand higher levels of service at lower costs. These demands will largely be met through efficiencies and innovation in the supply chain., they note. “Today’s supply chain leaders should embrace, not fear, the future.”

 

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