By Steve Purvis, Operations Director at Bis Henderson Space
With the ‘perfect storm’ that’s been building over the last five years, what do businesses need to consider when developing their delivery proposition, and what will this mean for the future of warehouse space in the UK?
The Argos proposition…
Twenty years ago, Argos was winning awards for its supply chain and fulfilment systems supporting in-store, catalogue, phone and latterly online ordering for in-store collection; and then ten years ago with the explosive advent of Amazon and other ‘pure play’ eTailers, commentators were ‘ringing the death knell for Argos’ – to quote Retail Week. Now the omni-channel retailer is back in the headlines for all the right reasons – Fast Track same-day home delivery. Buy online before 6pm and they will deliver by 10pm, to 90% of UK postcodes. That is claimed to be better than Amazon can offer and ‘they said it couldn’t be done’.
Of course, Argos’ systems aren’t those of twenty years ago. The retailer was always very careful in maintaining the very minimum of in-store stock without quite stocking out, supported by an almost conveyor-belt replenishment operation. This meant that it could offer a remarkably large number of product lines through often quite small physical spaces.
The new, refined hub and spoke model sees larger stores acting as mini Distribution Centres, each replenishing around half a dozen smaller stores and fulfilling local on-line home delivery orders. This system was already in development when the acquisition by Sainsbury took place, meaning that 173 ‘hub’ stores are now supporting over 600 smaller outlets as well as the home delivery business.
Fulfilling on-line business from the physical shop estate seems at first glance to hark back to the earliest days of eCommerce, before volumes rose and it became unacceptable to have order pickers competing with ‘real’ in-store customers. The future was to lie in large, highly automated, central or regional fulfilment and distribution centres somewhere out near the motorway. Think Amazon and the big grocers like Ocado.
Exploring further servicing options…
However, even some of the big players are thinking that smaller is beautiful. Ocado has announced a ‘mini Customer Fulfilment Centre’ in Bristol. ‘Mini’ is relative however, it’s still 150,000 sq. ft of high-end automation.
Tesco, and other grocers, are finding they have spare space in their out of town hypermarkets – as customers abandon the big weekly shop in favour of home delivery or more ‘convenience’ level shopping – and are using these as replenishment depots for Tesco Metro and the equivalent.
To support a larger assortment in space-limited local stores, and to be able to offer on-line/mobile customers delivery in just a few hours, retailers must hold and pick stock much closer to where it is needed. On the distribution side, urban areas are becoming distinctly unfriendly to 7.5 tonne lorries, let alone artics, so retailers are looking to use their estates as hubs for transhipment into more acceptable ‘last mile’ delivery modes. That could offer a lifeline to beleaguered bricks ’n’ mortar High Street retailers and their landlords – however, it may be more problematic for some ‘pure play’ eTailers.
If eCommerce businesses are to compete with the likes of Argos and a growing number of High Street brands on offering super-fast delivery within just a few hours, then they will need to create a network of small, responsive stocking points close to the consumer. This could be done by tapping into the resources of those businesses with spare capacity on the edge of large towns and cities – independent businesses with the resources to flex to the needs of a collaborative partner.
A word from Steve Purvis, Operations Director, Bis Henderson Space...
Given the shortage of available space, particularly in a market where location is all important, collaborative solutions are a necessity rather than a nice to have. Factor into that, UK planning rules, and I see a situation where the most effective solution to holding stock close to the customer, is a clustered shared user model where businesses work together to service the consumer.
How can we help?
Such a network can be accessed through Bis Henderson Space, with its well-established and extensive list of independent businesses all looking for businesses to work with. Spare space, and perhaps existing IT and labour, could be attractive for the relatively modest needs of a local stockholding/ replenishment/ fulfilment point.