The retail industry is changing at an unprecedented rate. With e-commerce and the rise of online shopping, retailers have to rethink their supply chain strategies.
Statista reports that online sales accounted for 14.5% of the total sales in the US during the second quarter of 2022. The total revenue generated by the e-commerce sector between April and May 2022 was around $258 billion. It is also the record highest revenue for any quarter in history.
Hence, staying focused on this trend and taking the benefits of urban fulfillment centers to enhance your retail business is mandatory. Here’s how urban fulfillment centers are changing the face of the supply chain in the retail sector:
1. The Rise of Urban Fulfillment Centers
The first reason urban fulfillment centers are crucial to the supply chain in the retail industry is that they are more cost-effective. Urban fulfillment centers are a cost-effective way to deliver goods to urban customers, especially if you want to provide same-day delivery services.
They’re more flexible and agile and can be set up quickly. Moreover, urban fulfillment centers are located near the customer, which means that shipping costs will be lower for both sides and faster delivery times for consumers.
The second reason is that they can be easily scaled. The advantage of having urban fulfillment centers is that they are easy to set up, so you can add more capacity as needed. As a result, you don’t have to worry about having too much space or not enough space; instead, you can use an urban fulfillment center with just the right amount of space for your needs.
2. Fast, Reliable, and Cost-Effective Delivery
Speed is a key factor in e-commerce and brick-and-mortar retail. It’s important to get the right product to the right customer at the right time. Urban fulfillment centers can be located closer to customers, which reduces delivery times. Some studies have shown that consumers will pay more for products that arrive faster than expected.
In addition, urban fulfillment centers help improve your existing supply chain by reducing outbound freight costs. They also improve inventory management by providing faster access to more stock-keeping units (SKUs). It means you can reduce your inventory carrying costs while increasing sales velocity.
3. City-Based Order Fulfillment in Urban Areas
Urban fulfillment centers have a lower cost structure than rural outposts, allowing them to pass savings to their customers.
These uber-efficient and highly integrated urban centers can simultaneously accommodate both e-commerce demand and traditional retail stores. Thus each type of customer gets personalized service tailored specifically to their needs.
City-based order fulfillment is ideal for businesses looking to keep up with growing consumer demand in dense metropolitan areas with large populations with disposable income living close to one another.
4. Last Mile Delivery to Customers in Urban Areas
The last mile is the most expensive part of the supply chain, but it is also important. Delivering goods from a distribution center to store shelves can be tricky, especially when you factor in traffic congestion and weather conditions. Last-mile delivery is also a challenge for retailers who want to ensure their products arrive on time and at their best quality.
Last-mile delivery has also been a challenge for fulfillment centers because they must deliver goods quickly and keep them safe during transit. If any damage occurs during shipping or handling at these centers, the retailer will likely lose valuable customers due to poor customer service.
Logistics companies face similar challenges when delivering packages safely and quickly through various air or sea freight transportation methods.
5. E-Commerce Leads the Way for Micro Logistics
The rise of e-commerce has positively impacted the retail industry but has also created challenges. One such challenge is the need for fast delivery, especially after a customer places an order on their phone or desktop computer.
It has compelled almost 51% of retailers to offer same-day delivery to their customers. Also, 65% of retailers plan to offer this within the next couple of years. On the other hand, 49% of customers feel more inclined to shop online if they get same-day delivery options.
E-commerce companies have had to innovate at every step in their supply chain, from receiving the merchandise at a warehouse to delivery to customers’ homes. One key innovation is urban fulfillment centers. These facilities are smaller than traditional warehouses and serve as sortation points for orders shipped via next-day or same-day air services.
6. A Rapidly Growing Urban Population with Rising Incomes and Higher Standards of Living
The world is becoming more urbanized, and this trend is expected to continue. The US urban population has also seen a growth of 0.8% annually over the last five years, reaching approximately 277.4 million in 2022.
One reason for this trend is that rural populations are aging faster than their urban counterparts. As such, there’s less need for young workers on farms or small businesses outside city centers. Additionally, more people are moving from rural areas into cities because they offer better opportunities in terms of education, jobs, healthcare services, culture/entertainment options, etc.
7. An Urban Warehouse Reduces Per Unit Costs, Makes More Profit, and Increases Return on Investment (ROI)
When you have a warehouse in an urban area, you reduce per-unit costs and increase profit and ROI. It is because of the following reasons:
- The facility will be close to your customers and suppliers. As a result, it reduces transportation costs and increases efficiency and productivity.
- An urban warehouse can help you reduce inventory costs since it reduces the number of times a product needs to be handled before reaching its final destination.
- It’s easier for employees at an urban fulfillment center than at other locations. It’s because all they need to do is drive there instead of taking public transport or driving long distances from their homes.
The warehouse is also likely to be close to your competitors. It means you can easily monitor them and keep an eye on how they operate, which could help you stay ahead of the game. In addition, the facility will have access to amenities like restaurants, cafes, gyms, and other businesses that make life easier for employees.
Retailers Can No Longer Afford to Ignore the Fulfillment Centers in Urban Cities.
Automation and robotics have enabled retailers to scale their operations and deliver orders faster than ever. E-commerce has fueled this trend by enabling smaller retail brands and startups to compete with larger retailers on a digital level. Lastly, urbanization increases demand for online shopping services as consumers move away from traditional brick-and-mortar stores.
And finally, micro logistics is becoming more popular among retailers because it allows them to create seamless customer experiences while streamlining operations across the entire value chain.
If you are an e-commerce retailer, then the time has come for you to start thinking about setting up micro logistics centers in urban areas. On the other hand, if you are a traditional brick-and-mortar store owner, it’s time to pay attention because your customers don’t want to wait for products anymore.
