The days of physically going to a store, finding a parking space and then standing in long queues to take advantage of a department store sale are on the decline as online ordering and quick deliveries become the norm.
One of the main catalysts of this change are the micro-fulfillment centres (MFCs). Standing at the crossroads of supply chain and retail, these tiny, urban warehouses are gradually resolving the issue of last-mile delivery.
By squeezing warehouses into dense urban areas, MFCs cut the average distance between the centre and a customer to a minimum.
The changing consumer strategy
Amongst all segments of retail, food and groceries are purchased the most.
As consumer demand has risen over the years, so has online ordering. There are multiple players today in the food and grocery market, giving consumers a variety of options to choose from. But here’s a flipside – if the shopping experience does not meet their set expectations, consumers quickly take their business elsewhere.
According to ServiceChannel, 41 percent of consumers say they’re less likely to return to any store of the same brand where they’ve had a bad experience, and 69 percent say they’re more likely to shop at a competitor after just one bad experience.
Customer loyalty is on the line much more than it ever was, which is why it is essential for retailers to provide a differentiated shopping experience that covers both speed and convenience. And to be future-forward, retailers must evolve towards technology and space in their approach to order fulfillment.
Key advantages of MFCs
Several retail brands today include both brick and mortar as well as virtual stores.
At the store level, the product moves from the warehouse to the store’s backroom, and then to the store floor. Sometimes, in the case of online orders, products move from the store floor back to the backroom, before they are sent out.
With MFCs, the product directly goes from the centre to the store’s backroom, and then to the customer. This eliminates several steps and makes the delivery quicker!
There is another advantage – these MFCs require lower initial investment. Interestingly, several MFCs can be built for the cost of one automated distribution center.
These centres operate in a compact environment, and are small enough to be installed at the back of the store.
The last-mile battleground
In retail, where profit margins are slim, last-mile logistics have become the battleground for a competitive advantage. Retailers who can lower last-mile related costs are at a competitive advantage.
This has prompted variations in MFCs, such as “dark stores”. These dark stores look like supermarkets but are closed to customers. They are only to prepare pickup orders and facilitate deliveries.
Walmart recently opened Walmart Pickup Point, a 40,000-square-foot prototype outside of Chicago at a former Dominick’s grocery store. Customers drive up to the site to designated parking spots, and a Walmart worker loads up their trunk with their order. Walmart can also make deliveries from the location.
The inside of the location looks like a Walmart with groceries and everyday items. Unlike a traditional Walmart super center, however, customers are not allowed inside..
The way forward
Micro-fulfillment doesn’t exist in a vacuum, there are several related trends including small-format urban stores and autonomous last-mile delivery that are also gaining traction. MFCs could also be co-housed in small format urban stores, some that are already being run by retailers like Kohl’s and Target.
In the future, retailers and brands looking to stay in the game will need to take necessary steps to digitise their supply chains. They may have the best product in the world, but if it can’t be seamlessly distributed to consumers, then they will be left far behind in the race!
(Edited by Anu Choudary)