How omnichannel is offering wholesalers and retailers new partnering opportunities
Through a special arrangement, presented here for discussion is a summary of a current article from the IMS Results Count blog.
In many ways, the role of wholesale distributors has been historically defined as the warehousing of products and shipping of bulk quantities to retailers. While distributors are still the bridge between manufacturers and many retailers, omnichannel consumer behaviors are creating new opportunities for these companies.
In a very real sense, omnichannel is requiring both retailers and distributors to think in terms of “mass distribution” customized for single products to individual consumers.
Retailers do not have the infrastructure, systems or resources to do it all. They need strategic partnership from distributors, who can offer solutions beyond just holding inventory or shipping pallets to stores. Omnichannel can be the perfect storm of distributor opportunities.
Omni-retailers are searching for partners in at least five key areas:
- Drop shipments – Retailers are looking for partners to help with rapid fulfillment of long tail online SKU offerings without dramatically increasing inventory.
- Rapid replenishment for “click and collect” – All stores have limited back stock so they require rapid replenishment for volumes generated by online purchases and in store pickup. Real time inventory tracking is also a key click and collect requirement.
- Precision delivery in time slots – It’s not just about speed of delivery, but customers requiring delivery at specific times, like when they are home.
- Click and collect at lockers – Delivery to pickup lockers helps solve timing as well as convenience issues for commuters.
- Returns, reverse logistics – Increasingly, consumers are purchasing online but returning to stores. Retailers need assistance with controls and reverse logistics.
With its volumes, Amazon.com can afford to build its own distribution system and logistics all the way from China’s manufacturing plants to the local consumer, whether that consumer purchases from Amazon or a Marketplace retailer. Traditional retailers are realizing that they don’t have the infrastructure, resources and omnichannel capabilities to compete.
This creates a “perfect storm” of opportunity for distributors to play a strategic role in helping retailers to increase assortments, responsiveness and fulfillment of the “last mile” all the way to the customer’s door when they choose not to come to the store.
More dialog and research will be required. But, in the words of Jeff Bezos at Amazon, “Tomorrow is day one.”
Discussion Questions
DISCUSSION QUESTIONS: Do you see the role of third-party distributors greatly expanding to support the “anytime, anywhere” nature of omnichannel retailing? In which areas will retailers be better served by third-party distributors versus developing such resources themselves?
Poll
BrainTrust
Min-Jee Hwang
Director of Marketing, Wiser Solutions, Inc.
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
Omnichannel retail means making it a seamless brand experience for our customers. Winning retailers are those who use many different resources to make sure they never have to delay or tell a customer they need to wait for an order. That means significant opportunities for 3PLs, rapid replenishment, locker and alternative pickup point services. I agree, omnichannel’s maturity means partnerships will flourish. That also means retailers are going to need quick and flexible integration capabilities to their existing tech, like their order management systems … Start asking your vendors about this!
The landscape and the type of relationships between retailer, distributor and 3PL will evolve until the right balance is struck — by type of commodity — to provide timely, accurate, but profitable service to consumers. I don’t like the idea of adding an intermediary to the supply chain if it is not absolutely necessary. Conversely, distributors of small products generally are not configured to pick ones and twos. In those cases, the 3PL may become a necessary additional expense. For large products, it makes little difference. However, new types of information exchange among all of three entities will become necessary. For example, retailers have not had to provide individual customers’ delivery information to distributors; they will now.
I do see an opportunity for third-party distributors to assist retailers but in no way can they develop themselves into a new business. Sending the product ordered by a consumer via the retailer to the retailer for pick up would work well for distributors. It would allow for an increase in business but would also maintain their distribution network and not create a new one. Even if the distributors partnered with the retailers to offer them more business as they entered a click-and-collect direct business they would need them to again send the product for collection at a retailer. For the distributor to start to send product directly to the consumer or, better yet, thousands of consumers would not be a profitable change to their model. Let their new partners, the retailers, help them and then it is a win-win!
Just like retailers and their suppliers/manufacturers, wholesale distributors (W-Ds) need to be incredibly agile in today’s marketplace. Quite simply, the physical demands of omnichannel commerce are driving myriad requirements that W-Ds can step up and take control of. Services is where W-D growth lies. That has been true for years now. There is even opportunity for W-Ds to capture revenue with CPG direct-to-consumer channels in some of the areas mentioned in this article.
Omnichannel can turn retail upside down. Mass and bespoke product producers have had the B2B advantage of B2C investment by retailers and as consumer expectations evolve, these producers are poised and proceeding with disintermediation. Ship-to-consumer can eliminate stores as the middle-man should bands determine that they are in the business of not just manufacturing, but consumer service. This is the core friction between physical retail and online commerce.
Yes, there is plenty of opportunity for all parties involved from wholesaler to 3PL to retailer for productive partnerships. Amazon has a scale now that very few, if any, retailers can match in this area. These partnerships will be key to retailers developing their omnichannel readiness and execution. In the absence of these partnerships many retailers will struggle to deliver the customer experience they want for their shoppers.
Retailers are tapping into the entire retail community, or their “tribes,” to quickly and efficiently offer the best product possible for their consumers through the best channel. Using these new channels and partners has become a necessity for retailers and wholesalers. In addition to omnichannel selling partners, retailers should tap their “omnichannel” supply chain, including sourcers, designers, suppliers and more, for the greatest range of inputs on product development. Using the partners, the community, the tribes on both the delivery and the development sides is needed to keep up with today’s consumer demands.
Smart retailers will take advantage of partners, including wholesalers and 3PLs, to fulfill on the omnichannel promise.
With elevated consumer expectations, expecting everything whenever and wherever they want it, there is an incredible opportunity for distribution partners. Unless you are a nationwide chain with stores in close proximity to most consumers, third-party distributors are primed to play an important role in omni-channel retailing.
With inventory stored at third-party distribution warehouses across the country, even small retailers can offer click and collect or same-day home delivery services. It gives them a chance to compete with the big chains.
With omnichannel retailing steadily gaining momentum, this is a great opportunity for third-party distributors to expand and grow into the omnichannel experience. Retailers who need to control the whole supply chain would have to invest heavily in order to develop and maintain the network. Leaving it to third-party distributors is cheaper and more than likely would provide better service than the retailers themselves could provide. It’s simply a matter of finding a good balance and partnership between the two parties.