In today’s quickly evolving omni-channel retail environment, and with more demanding consumer expectations, retailers face both challenges and unique opportunities.
To stay competitive and flourish, it’s important to understand how the Canadian retail landscape is changing, and have the infrastructure to be able to react quickly when opportunities present themselves. There is a short window for businesses to either innovate or evaporate.
Over the past 12 months, the team at SCI has sat down with many retailers to discuss their supply chain needs, and, in the process, discovered common themes. We’ve narrowed these down into the top three trends that are affecting Canadian retailers’ supply chain investment strategies in 2017 & 2018.
- People, Processes, and Systems
As we all know, e-commerce has been growing at a rapid pace in Canada. The Apparel segment is a great example of how the changes in the Canadian market are virtually identical with the U.S. market: 20% growth in online apparel sales compared to 1% growth at the store level[i].
If your supply chain is designed to support retail store fulfillment first, online second, it’s time to rethink your logistics strategy and make the necessary investments to ensure that you’re effectively enabling e-commerce distribution. Be prepared to invest into new processes that can support unit vs. pallet pick and add new skills and investments to handle B2C pack & ship requirements.
It also means your team needs to include a different type of talent with specialized e-commerce skills & expertise. Supply chain systems will also need to include higher levels of automation that can decrease dependence on manual labour along with new capabilities that provide real-time inventory visibility, and enable the variety of delivery options today’s consumer’s demand.
- Cost effective Scalability
The e-commerce sales channel is growing rapidly, and placing much greater demands on your order fulfillment function and distribution channels, especially during high sales volume seasonal periods such as Black Friday, Cyber Monday, Christmas & Boxing Week. Retailers need to be prepared for larger, longer and more intense peaks. Many Canadian retailers generate as much as 40% of their yearly business during the Christmas shopping season alone[i]. This means that retailers who can’t quickly scale up the key areas of their supply chain are missing out on a significant potential portion of their overall annual income and subsequent profits.
From a distribution standpoint, having the ability to scale quickly is essential for accommodating such a large influx of volume in such a short period of time. To scale your distribution operation, you will need to invest in additional warehouse space and labour force. Alternatively, retailers can explore 3PL partnerships that can scale and support rapid growth of their business, especially those 3PLs that have proven experience in managing peaks. 3PL providers will have access to the required labour force and a more flexible warehouse environment, ensuring smooth, flawless peak seasons. Furthermore, access to value added services such as specialized kitting, regulatory compliance & even point of sale (POS) support. These extra services provided by a 3PL partner can often make the difference between losing and winning in the Canadian retail market.
- Faster times from Buy Button to Product Arrival
While handling increased number of orders during seasonal peaks is very important, another critical logistics consideration is related to delivery times. Amazon now offers same-day and 2-day delivery with standard shipping in a growing number of Canadian markets.
The “Amazon Effect” is essentially changing consumers’ expectations of how quickly they can receive a product once they click the “Buy” button. Furthermore, Amazon is predicted to make up 50 per cent of all U.S. e-commerce by 2021[i], uplifting the standards for consumers’ e-commerce experience even higher. This has already affected the expectations of Canadian consumers who are no longer willing to wait for over a week to receive their online purchases.
Companies who want to sell their products coast-to-coast in Canada may need to invest in a distribution presence in the West, or partner with a 3PL provider who has the infrastructure, knowledge, and skills to quickly fulfil and deliver online orders right across Canada. Operating out of two or more distribution centers, in Eastern and Western Canada, is becoming more of a necessity to ensure a positive user experience with the online channel.
The growth of online sales, the importance of scalability during intensified seasonal peaks, and the “Amazon Effect” that’s driving consumers’ expectations of quick delivery have all been pushing retailers to rethink the foundations of their supply chain strategies. And, of course, outsourcing supply chain services has become one of the key strategic decisions for retailers that aim to thrive in the Canadian market place.
If you’re like many Canadian retailers looking to improve their supply chain, we encourage you to explore our wide variety of supply chain solutions designed specifically to solve your complex challenges. Then, when you’re ready, contact us; we’re here to answer any questions you might have, and help however we can.
[i] Behind the Online Appeal Boom - Jack Love, Internet Retailer, 2016, pg.3 [ii] How To Profit From The Shortest Holiday Retail Season In A Decade - Hardeep Walia, forbes.com [iii] Amazon Will Make Up 50% of All U.S. E-Commerce by 2021 - Phil Wahba, fortune.com