2017: A Transformational, or Transitional Year For Supply Chain?

By any measurement, 2017 was a significant year for supply chain executives involved in both manufacturing and retail. Major U.S. retailers closed over 5,000 brick and mortar stores, Amazon announced significant acquisitions and supply chain investments, and e-commerce closed out the year with what’s believed to have been a dominant holiday sales season. At VCO Systems, we helped our clients address the needs of a rapidly changing consumer marketplace. But was 2017 really a transformational year for the industry, or just a transitional one? Before we look ahead to what’s in store for 2018, let’s take a look back at the events that shaped 2017.

Retail is dead, except when it wasn’t.

The headlines early in the year portended a rocky year ahead for brick-and-mortar retail, and they were mostly right. In addition to major store closures, we saw meaningful shifts in channel strategies, unusual alliances such as Kohl’s decision to accept Amazon returns, and of course, the blockbuster acquisition of Whole Foods made by Amazon, which quickly put the $668 billion U.S. supermarket industry directly into the omnichannel crosshairs. But along the way, some conflicting trends began to emerge. For one, total holiday retail sales saw their best holiday season since 2011, particularly for home and electronics retailers. While online retail may have continued the trend of taking a larger portion of these sales, as just about anyone who lives in a populated metropolitan area already knows, mixed-use shopping development is still on the rise around the country. Retail may be in challenging times, but neither the data nor the eye test supports its imminent demise.

It’s an Amazon-dominant world.

To be fair, Amazon has been a newsmaker almost from the time Jeff Bezos created it as Earth’s Biggest Bookstore in the late 1990’s. However, few can argue that 2017 was a particularly eventful year for the world’s retail e-commerce leader. While the Whole Foods acquisition, international expansion, and supply chain investments may have been the most important from a business standpoint, the company’s ongoing HQ2 search may have been the surest sign yet of just how important Amazon has become. In what quickly became a public relations bonanza for the company, 238 cities jockeyed for position to host Amazon’s second headquarters. Proposals ranged from the generous to the wacky, including a city in Georgia willing to rename 345 acres of its land to attract the behemoth. Whatever the HQ2 outcome in 2018, it may be hard to top the activity of 2017.

It’s all about omnichannel.

Like many new technology-driven business trends, sometimes it takes time for new ideas and terminology to take hold. 2017 may have been the year the term “omnichannel” really went from a buzzword to an actual business strategy. With only 8% of retailers believing they have mastered omnichannel, there is clearly more work to be done ahead. In our business, we continue to focus on solutions that allow our clients to maximize their flexibility. While few can compete with the infrastructure investments being deployed by the likes of Amazon, Walmart and Target, we help retailers and manufacturers leverage existing infrastructure to get through seasonal peaks and unexpected demand. And with implementation times generally around six weeks for many projects, we can do so quickly and nimbly. Only time will tell whether 2017 was truly a transformational year, or simply a transition to a retail and manufacturing world that has yet to be fully defined. In either event, for those that believed supply chain to be a mundane industry, it promises not to be uneventful again anytime soon. Stay tuned.