Once COVID-19 is behind us, will traditional business-to-business retail stage a comeback, or is direct-to-consumer e-commerce the new normal? For an uncertain future, one strategy gaining ground is the “warehouse-in-a-warehouse.”
Demand for business-to-consumer fulfillment has delivered a brutal one-two punch to warehouse operators in the past five years. Non-store retail, mostly e-commerce, has steadily grabbed market share from department stores, malls and specialty retailers, doubling since 2015 from 7-14% of total sales, according to Statista. Arrival of the COVID-19 pandemic early this year pushed the trend to explode: E-commerce sales jumped 32% in the second quarter from the first quarter — and 45% year-over-year to nearly $212 billion — even as overall retail sales declined. B2C retail is now 16% of total retail sales and climbing.
Traditional warehouse management systems (WMS) designed for B2B freight assume centralized control of fewer and larger shipments, more merchant inventory at rest, full case picking, aggregated pickup and delivery, and lower cost per mile with fewer stops on truckload (TL) and less-than-truckload (LTL) vehicles. B2C fulfillment is nearly a reverse image, with its “endless aisle” of inventory-in-motion held by others; “eaches” picking and packing; higher volumes of smaller orders; multiple items per order; and higher costs for faster and free residential, last-mile parcel delivery.
Warehouses have struggled to accommodate both models under a single legacy WMS operation. Typically it involves on-the-fly workarounds to accommodate direct-to-consumer fulfillment amid normal B2B logistics activity. Replacing legacy WMS systems has been hard to justify so long as B2C demand was incremental.
But the macro e-commerce trend, accelerated by COVID-19, is pushing B2C toward a tipping point.
Read Flexible Warehousing: A Shortcut to Direct-to-Consumer E-Commerce to learn more.
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