Logistics, a crucial part of the supply chain, has driven operational efficiencies and enabled businesses to stay competitive for decades globally. Through effective and efficient logistics and technology, retailers benefit from lower operations costs, including material sourcing, inventory management, and warehousing, to designing effective order fulfilment strategies through timely last-mile delivery.
According to Retail Global Market Report 2023, the global retail market grew from $26,178.76 billion in 2022 to $28,344.51 billion in 2023 at a compound annual growth rate (CAGR) of 8.3%, and the retail market is expected to grow to $37,665.83 billion in 2027 at a CAGR of 7.4%. The demand for retail logistics is increasing due to growing international commerce operations, particularly in emerging countries. It is estimated that the expansion of the logistical infrastructure will accelerate market expansion. The retail logistics system enables a smooth and efficient movement of non-durable and durable goods from several esteemed distributors, suppliers, and retailers to customers worldwide. Furthermore, speedy product delivery at low fulfilment costs has been made possible by the retail industry’s use of logistics.
Impact of Logistics on Retail Business
Globally, logistics directly impact the success of a retail business as logistics and retail work simultaneously. Logistics impacts retail businesses in the following ways:
1. Product Availability
Logistics is a crucial aspect of retail business in the global world. Efficient logistics has a positive effect on other operations in the retail supply chain. It plays a vital role in ensuring the efficient flow of goods from the supplier to the warehouse, storage, distribution centres, and retail stores. This directly affects the retail company’s product availability, visibility, profit, and customer service. Efficiency in retail logistics brings about positive growth in the business’s success.
2. Product Delivery
In today’s competitive industry, where customers expect goods to be delivered to them on time, retail businesses rely on logistics providers to ensure the timely delivery of goods to the customers. The National Retail Federation’s 2019 Consumer View survey reflects that 65% of consumers consider cost and delivery time before adding products to the shopping cart. Thus, delivery terms directly affect purchasing decisions.
For instance, the popularity of the Amazon Prime subscription program, which has over 200 million Prime members, is based precisely on free and fast shipping, which is carried out effectively. According to Amazon Prime User and Revenue Statistics 2023, Amazon sold more than 100,000 items per minute during Prime Day. It was also stated that Sales during Prime Day on Amazon reached over $12 billion in 2022. This was achievable because Amazon established same-day and one-or-two-day delivery of goods as the standard delivery time expected by consumers.
Fast response time is the most crucial attribute of a good customer experience. Quick delivery of the right products guarantees the happiness and satisfaction of the customer. The satisfaction and happiness of the customers result in more sales and long-lasting brand loyalty for retailers.
3. Inventory Management
Retailers can track stocks physically stored in the warehouse through a logistics management system. It provides retailers with information on the goods available in stock and out of stock, preparing the retailer for goods to be restocked. Effective inventory management is essential to the success of a retail business as it ensures the right level of stock to meet customers’ demands and prevents overstocking, which harms the business’s profitability.
4. Returns Management
Reverse logistics makes it easy for goods to be returned to the retailer when customers wish to return goods. Reverse logistics makes it seamless for goods to be collected, organised, restocked, or recycled. As online sales increase, the return rate is also increasing. Therefore, a working return policy is essential for a retail business to run smoothly and maintain customer loyalty.
5. Cost Effectiveness
The collaboration of retailers and key players in the global logistics market (such as J.B. Hunt Transport Services, Inc., CEVA Logistics AG, XPO, Inc., Global Leader, Inc., Kenco Group Inc., FedEx Corporation, United Parcel Service, Inc., GXO Logistics, Inc., and so on) initiates cost reduction. Retailers partnering with these logistics companies enable them to take advantage of economies of scale and get discounts on transportation and delivery. This partnership helps stabilise the cost of delivery and the cost of stock transport, which has a great influence on the price of the product for customers.
6. Improve Customer Experience
Globally, retailers can improve their customer experience by partnering with a logistics provider. These logistics providers facilitate the transportation of products to retail stores at the right time, ensuring products are made available to meet customers’ demands. Logistics providers also operate with online retail stores to ensure that goods ordered by customers are delivered to them at the right time, condition, and cost. The availability of products in retail stores and quick delivery to customers help build customer loyalty and repeat customers.
Innovative Logistics Technology for Successful Retail Business
1. Automation
In retail, the operation and processes in the warehouse can be automated through the use of autonomous mobile robots. This converts the manual process of managing the warehouse into an automatic process. For instance, manually lifting, moving, and handling products in the warehouse can be time-consuming, hazardous, and prone to error. However, a full or semi-automated process helps improve efficiency, a safe working environment, risk, and cost.
2. Supply Chain Visibility
Real-time visibility is essential in the retail business. Supply chain visibility entails the activities that allow retailers to track and trace the movement of goods from the suppliers, warehouse, retail store/distribution centre, and finally, to the customers. GPS tracking systems and complex systems are mostly used to plan, schedule, monitor, and track the delivery of products into the warehouse, retail stores, and most especially to the customers. Globally, retail businesses can improve their productivity, product visibility, competitiveness, and customer satisfaction through this technology.
3. Artificial Intelligence (AI) and Machine Learning
Logistics is increasing significantly with the rapid development of machine learning, big data analytics, and artificial intelligence. The use of these technologies in retail business makes the supply chain process error-free, easy management of the inventory, and timely delivery of customers’ orders.
4. Transport Management System (TMS)
In today’s world of technology, customers expect to get their orders at the appropriate time. Transport management software provides retailers with information and insights that enhance trade compliance, increase speed, reduce transportation costs, and improve supply chain planning. This system ensures the timely delivery of goods, increasing sales, transparency, and customer satisfaction.
5. Internet of Things (IoT)
The Internet of Things (IoT) provides retail businesses with tools for planning, monitoring, and increasing the security of all business operations. The warehouse and supply chain processes can be monitored and tracked remotely with the Internet of Things (IoT). In the retail business, this helps improve security and theft detection in the warehouse, ensure employee safety, monitor inventory, track product delivery, and provide retailers with advanced analytics.
Globally, logistics plays a vital role in attaining a successful retail business. For a retail business to succeed, it is essential to implement an effective and efficient logistics strategy to ensure the right product is delivered to customers at the right time, condition, and affordable cost. Other factors expected to positively influence the logistics market growth and retail industry include continuous technological advancements, the integration of biometrics, increasing international trade agreements, driverless vehicles, GPS, and drone delivery.
At pcl., we understand the importance of having an effective and efficient logistics strategy for your retail business to be successful. We are equipped with experts that can develop logistics strategies and oversee the implementation of these strategies to increase your business competitiveness and profitability.
Written by:
Mercy Akindele
Analyst
