As we begin the second quarter of 2023, global supply chain disruptions and geopolitical conflicts continue to foster uncertainty in the retail marketplace. Add inflation, nationwide labor shortages, and an increasingly competitive landscape to the mix and many e-commerce retailers are struggling to get the goods they need when they need them, and to deliver orders to their customers in a cost-effective and timely manner. To keep orders flowing, retailers should consider three key factors shaping the e-commerce landscape in 2023.
Customer Expectations Are Evolving Around Sustainability and Convenience
Sustainability — from how materials are sourced and produced to last-mile delivery options — may be approaching a tipping point among consumers, especially amongst millennials and Gen Zers. A 2021 report examining Gen Z’s influence on sustainability-first purchase decisions noted that U.S. consumers across all generations are willing to spend more for sustainable products, with nearly 90 percent of Gen X consumers willing to spend an extra 10 percent or more, compared to just over 34 percent in 2019.
To their detriment, however, retailers are falling short on prioritizing sustainability in alignment with consumer expectations. For example, a recent study that examined consumer sentiment of retailers’ sustainability practices around their delivery operations found that only 38 percent of consumers felt retailers were doing a good job of using sustainable delivery practices — despite 50 percent indicating they were quite/very interested in environmentally friendly delivery methods, and 54 percent indicating they were willing to accept longer lead times for an eco-friendly delivery.
Retailers can differentiate their brand and boost sales by incorporating sustainable practices and offering environmentally friendly delivery options, while also recognizing that some consumers prioritize other factors in their online shopping and home delivery experience, such as delivery convenience or speed.
Labor Shortages Are Impeding Fulfillment Efficiency
The persistent shortage of warehouse labor has thrown a wrench into order fulfillment operations for many e-commerce retailers in 2023. Given the rumblings of less-than-ideal warehouse working conditions, low wages, and a U.S. unemployment rate of 3.4 percent — the lowest level in 54 years — it’s no surprise that attracting and retaining warehouse staff is an ongoing battle for retailers.
To offset workforce challenges, many companies are turning to automation to increase employee productivity and make warehouse roles easier and less stressful. Technology that connects to a broad range of marketplaces/channels and standardizes warehouse processes (e.g., receiving, picking, packing, carrier selection, shipping) is key. To help workers see the correct size and color of items at a glance, barcode-based scanning is a must. A barcode scan can do even more: it can activate background processes to inform a customer that an item has been picked and is on its way. The same scan can also update sales channels with stock availability, which can mean more sales. Workflows driven by artificial intelligence and machine learning have the potential to further simplify warehouse roles in the future.
Disrupted Supply Chains Are Intensifying the Impact of Fluctuating Demand and Escalating Costs
Before retailers have a chance to catch their breath after the onslaught of post-holiday returns, demand spikes associated with short-lived holidays — Valentine’s Day, St. Patrick’s Day, Easter — are on the doorstep. The impact of single-day holidays on order fulfillment is sizeable: consumers were expected to spend $20.8 billion on Easter celebrations alone last year. Given the large quantities of products with short shelf lives and quick expiration dates, managing inventory and fulfillment workflows to meet demand surges within tight timeframes can be tricky to navigate successfully and cost effectively.
In order to mitigate the impact of volume fluctuations and keep costs in check without sacrificing the customer experience, astute retailers are leveraging technology to unify warehouse and shipping performance to drive fulfillment excellence. Plus, with software-as-a-service (SAAS)-based scalable infrastructures, e-commerce retailers can flex their technology solutions to ramp up and down quickly and protect profit margins.
Supply chain disruptions and staff shortages will continue to make day-to-day e-commerce operations challenging. However, the move away from the chaos of explosive demand that has characterized the past few years is enabling retailers to take a beat and focus on cost containment, operational excellence, and meeting evolving customer expectations.
Johannes Panzer is the head of industry solutions for e-commerce at Descartes, a logistics technology platform.
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