It is going to take some time before we fully understand all the lessons of the COVID-19 pandemic, if we are able to do so at all. One of the biggest issues has been trying to distinguish between short term reactions to the pandemic, and longer-term trends that are here to stay. The recent focus on micro-fulfillment continues to present us with these types of questions. With that in mind, let’s take a look at the recent drawdown in ecommerce and micro-fulfillment, and how DWM&H can help you adjust your business model.
THE SHIFT
The writing has been on the wall for some time—that shopping is headed online and customers are going to demand more efficient delivery of the products they buy. Many experts predicted that because of COVID-19, this ongoing shift towards ecommerce was accelerated by several years as folks were forced to spend so much time in their own homes. As a response, distribution in many urban areas shifted to focus on micro-fullfillment —the use of small scale warehouses that are built closer to consumers in order to shorten shipping and receiving times. The thinking was that the pandemic jumped us ahead a generation, and businesses scrambled to find solutions like micro-fullfillment. However, we may have gotten a little bit ahead of ourselves.
THE REVERSAL
It makes perfect sense that the pandemic would cause some overreactions in the business world, and that is part of what our team at DWM&H has seen in the last several months. The numbers are clear, we have seen a snapback to pre-pandemic levels of brick and mortar purchasing. There has been a corresponding reduction in eccommerce as the public has begun to buy more products in person again. Retail businesses across different industries have seen a reduction in their online business without a reduction in their overall sales. This has left some retailers scrambling to provide in-store fulfillment options and reassess the titanic shift to automation and micro-fulfillment that has taken place over the last five years.
THE LESSON?
Again, only time will tell what the real lesson of the pandemic was for distribution. It remains to be seen if the slowdown in ecommerce and the increase in brick-and-mortar purchasing is just a reaction to the lifting of pandemic restrictions. We could very well continue down the road to increased automation and micro-fullfillment after the smoke clears from all of this. Our advice to clients at DMW&H is simple — understand your return on investment. It is more important than ever to have good, reliable metrics in place that can quantify how much bang for your buck you are getting out of a new piece of automation, a new micro distribution center, or a reorganization of your warehouse. This is where the winners and losers will be made. The businesses that learn their lessons too late, and do not have reliable software to guide them through these market shifts, will be the ones to fall.