As retailers prepare for the 2017 holiday season, recent surveys suggest it could be a strong one from a revenue standpoint. In an October survey, The National Retail Federation (NRF) announced findings that the average retail consumer is projected to spend $967.13 this year, a 3.4% jump from the $935.58 that was spent in 2016. This news follows other similar reports indicating a surge in consumer confidence, which typically leads to more dollar signs for retailers. But while this news should be met with joy, there’s also a note of caution — increased sales means a greater strain on all resources, particularly on the logistics back-end where timing is of the essence.
Warehousing infrastructure is expensive, yet critically important in today’s omnichannel retail world. I’ve previously written about the impact of Amazon Prime and the fast shipping expectations it has created for the consumer. Warehousing requires a large footprint, and recent estimates peg the cost/square foot to be rising. According to commercial real estate firm JLL, vacancy rates for space has decreased to 5.2%, down from an average of 8.1% in the last decade. Rental rates have hit a high of $5.40/square foot. While it’s hardly the only driving force in the equation, industry behemoth Amazon has announced plans to build 35 new distribution centers to complement its existing network of 105, including a 67-acre parcel of land in Ohio that was previously home to a mall once considered the largest in the United States. On top of that, the company’s $13.7B deal to purchase Whole Foods will turn its grocery stores into 400 mini distribution and pick-up centers, as deal that proves logistics infrastructure is clearly top of mind for the Seattle giant.
So while we can visibly see Amazon’s logistics strategy, where does that leave everyone else? In the long-term, retailers can invest in their own new distribution centers, or turn to a network of third-party logistics (3PL) companies who can more quickly add space and capacity. However, that does not solve the short-term needs of retailers who need to manage seasonal peaks, particularly those highly dependent upon holiday sales to make their yearly numbers. According to NRF, the holidays can represent upwards of 30% of annual retail sales for some retailers. A poor customer experience during this time period is not only problematic, but can be catastrophic in an environment where competition is so fierce. Staying nimble, and being flexible with fast-changing consumer habits is critical for retail survival.
When we launched our new suite of putwall, put-to-light and pick-to-light solutions last year, the focus was on helping our clients make the most efficient use of warehousing space, and the human resources that go along with it. Our solutions utilize technology to leverage existing infrastructure, such as mobile carts, creating on-the-fly capacity enhancements that can be quickly scaled up or down as order demand dictates. This ensures that our clients aren’t having to go to the expense of building complex infrastructure that may be unnecessary for 11 months of the year, and we can have them at go-live in a six week timeframe from contract signature to launch. Regardless of what the right combination of options might be for a particular retailer, the stakes are higher than ever to be ready for the holidays.