E-commerce experienced a decade’s worth of growth in just three months at the pandemic’s beginning. This rapid shift away from physical channels exposed the crack’s in retail’s foundation: labor shortages, shipping costs, and increased customer expectations. With e-commerce leveling off and brick-and-mortar stories staging a comeback, companies are rethinking their warehouse and fulfillment strategies.
The future of retail in general — both in the e-commerce world and in-store operations — is about efficient and smart operations, and that should be a top priority for brands in 2023. Here are three predictions for the coming year.
Micro-Fulfillment Centers: Putting Merchandise Closer to Buyers
Over the past two years, the sprawling fulfillment warehouse became one of the symbols of the pandemic-driven boom in e-commerce. These giant buildings, typically in remote locations, served as a key link in satisfying customer demand for fast, free shipping.
Where the past few years have been about thinking big, businesses are now thinking small with the deployment of micro-fulfillment centers (MFCs). Where an average Amazon fulfillment center clocks in at around 800,000 square feet, an MFC typically takes up less than 50,000 square feet, in many cases as small as 10,000 square feet. That means it can fit neatly into populated urban areas and put a brand’s inventory closer to its end customer.
Underutilized areas like extra store space in malls or underground parking lots make ideal locations for MFCs, allowing businesses to take advantage of falling commercial real estate prices and a glut of inventory near a city center.
Robotics: Maximizing Efficiency While Working in Harmony
A key component to making the MFCs work efficiently is the use of robots navigating the tight spaces where human workers can’t fit to pick merchandise from warehouse shelves and deliver it to a person for packing and final shipping. Powered by AI, robots within MFCs operate in coordination with each other on a virtual city grid. They’re intelligent and can adjust course on the fly, keeping the process running smoothly. As the robots learn more about the ideal path for operations, throughput can increase by as much as 30%.
Creating efficient spaces where robots work alongside people opens up new ways to design MFCs. With robots handling the job of finding and picking out merchandise, the area they work in can be designed specifically for them: expanding from wall to wall and from floor to ceiling in spaces that people can’t typically reach. By using the entire cubic space available, a small, dense MFC can achieve the same efficiency levels as a larger, traditional fulfillment center.
As technology improves, there’s the opportunity for vision-based machine learning to create a fully autonomous picking process, amping up the efficiency and allowing people working at the MFC to focus on more strategic work.
Social Commerce: Merchandising and Retail at TikTok Speeds
While buying items directly from a social media platform won’t replace the in-person shopping experience, it is changing the landscape of the e-commerce industry. Social commerce is expected to reach a value of $1.2 trillion by 2025, according to an Accenture report from earlier this year. To stay competitive, brands must both meet their consumers where they are while also ensuring product availability and fast delivery.
Through their own mobile apps, brands can get feedback on what products their customers in a targeted area are interested in, then put those specific items on store shelves in that area. It’s using the wisdom of the crowd to determine what goes into inventory, along with the ability to turn on a dime and put out new products as demand changes.
Speed also becomes of utmost importance in social commerce. As TikTok users quickly scroll through videos, creators only have a few seconds to captivate the attention of their audience. That same speed must carry through the entire experience from first click to delivery, which is why TikTok is looking to expand its warehouse space in the U.S. to accommodate the growth of its in-app TikTok Shop.
Whether driven by ongoing supply chain issues or changing customer expectations around fast and free shipping, the retail experience will look different in 2023. Brands that rely on traditional fulfillment methods will likely find themselves playing catch-up to more nimble competitors.
