Fulfillment. It is more than a satisfying feeling experienced by consumers as they receive their purchases. Fulfillment is the complex matrix of the storage, compilation, packaging, shipping, and delivery of goods. Understanding it is like evolving from a person who likes road trips into someone who can speak to every nuance of a car’s engine. Perhaps this is why the paradox of “fulfillment” is one of the most unexpected lessons of this past pandemic year.
It took COVID-19 to open the eyes of the world to intricacies of the fulfillment universe and interconnection of logistics. Consider how aware we now are of COVID-19 vaccine distribution hurdles – the tiny delivery window; the unprecedented demand for refrigeration and freezer capacity; the limited shelf life. It is a delicate balance to be sure. But does it really sound that different from our global food distribution needs? Why has it taken a pandemic to unveil to us the step-by-step processes that put goods in our hands and homes?
For a start, we are no longer just “end consumers” waiting to simply feel fulfilled. We want insight into every step of our consumer food journey. We want value pricing, constant availability, speedy delivery, living wages for food workers, reduced environmental impact, increased nutritional quality, safety, and convenience…our demands are enormous and endless. For brands and companies, meeting these demands is a like a game of Jenga, where one wrong move topples the tower and game over.
So, what do brands and companies need to understand, to navigate both consumer and logistical fulfillment, and its impact on their bottom line?
Shipping costs: Consumers will no longer accept the burden of high-priced shipping costs. That burden now rests solely on brands if they want to succeed. According to a recent report by the National Retail Foundation, 75 percent of consumers expect delivery to be free even on orders under $50. The same report shows that most consumers consider shipping costs even before getting to the checkout page, with 65 percent saying they look up free-shipping thresholds before adding items to their online shopping carts. And not just any shipping will do – speed is a must – with 39 percent of consumers expecting two-day shipping to be free, and 29 percent saying they have backed out of a purchase because two-day shipping wasn’t free. Smart brands are learning to adjust online product pricing to make up margins, but others remain victim to consumers’ insatiable appetite for cost-free convenience.
Nowhere is this shipping investment burden more obvious than with Amazon, even with Prime membership revenue to help offset costs. According to the company’s 2020 Q4 earnings report, Amazon’s shipping costs ballooned 67 percent as the company pushed one-day shipping. In Q4 alone, Amazon spent $21.4 billion on shipping. Amazon also grew its fulfillment center footprint by 50 percent in 2020 to meet demand.
Micro-fulfillment: Innovative, scalable solutions – like the new, North American joint market offering for end-to-end eGrocery Management Solutions, from Attabotics and FoodX Technologies – can provide retailers of all sizes with a turn-key, highly flexible solution for automated micro-fulfillment of fresh food. These advances merge front-end e-commerce, delivery routing, inventory management, fulfillment and reverse logistics, so companies big and small can compete on the global market.
Since COVID-19 was declared a pandemic in March 2020, the grocery e-commerce market has witnessed explosive growth and is projected to continue an upward path. These new micro-fulfillment centers – according to Produce Blue Book – have the ability to convert old retail spaces, warehouses, and malls into condensed footprints closer to major cities and target customers, reducing carbon output and accelerating delivery times.
“Big Box” booming distribution center growth: For every new micro-fulfillment center footprint, there remains a larger big box store distribution center (DC) location to counter it. Unlike many other segments of the economy, warehouse and DC development is not only withstanding the widespread economic impact of COVID-19, it’s thriving. Companies cannot find space fast enough and developers can’t build DCs quickly enough to meet demand. As Logistics Management reports, despite the scares COVID-19 has hurled on other industries, e-commerce has ensured steadily high demand for warehousing, distribution and fulfillment.
Third-party logistics are here to stay: The vastly accelerated growth of digital commerce has many businesses embracing digital storefronts for the first time and seeking outside logistical support for order fulfillment. Third-party logistics (3PL) companies have expanded their ecommerce and fulfillment capabilities to keep up – not just with capacity, but with transparency. As Inbound Logistics shares, online shoppers want full visibility into their product’s journey – from order fulfillment, to when it reaches their doorstep – and near-instant gratification, pushing companies to need pick, pack, and ship services completed faster and more accurately than ever. Businesses with issues in their supply chain and an inability to fulfill orders are often doomed. So, companies must find perfect partners to streamline these processes, share their commitment to customer service, and enhance visibility, speed, and accuracy.
Even convenience is open to consumer backlash: Don’t shoot the messenger…but feel free to blame them for taking their cut of the profits. Consumers are fiercely loyal to their favorite food companies and increasingly aware of the financial burden food brands assume by engaging third-party fulfillment partners. According to the Washington Post, restaurant delivery fulfillment by companies like DoorDash and GrubHub, means they collect anywhere between 10 percent and 30 percent of each order in fees. And customers do not like it.
Is it just the cost of completing the logistics lifecycle? Or is it foreshadowing a greater consumer backlash on who picks up the tab for our fulfilling new food reality? Consider the resounding backlash to the recent Uber Eats and DoorDash Super Bowl commercials that touted the brands’ support for neighborhood restaurants and local businesses. Patrick Radden Keefe, a James Beard Award-nominated staff writer for the New Yorker tweeted the following: “The idea that Uber Eats, a parasitic app, has just rolled out the new tag phrase ‘Eat Local, Support Local’ gives even my cynicism a run for its money.”
Ouch. But such is the paradox of “fulfillment.”
This article was initially published in O’Dwyer’s Food & Beverage PR issue.
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