5 Challenges and Opportunities Facing Retailers Establishing a Global E-Commerce Supply Chain
The road to global e-commerce success can be an uphill climb for retailers entering an international market for the first time. As a retailer seeks to establish an omnichannel supply chain and distribution network in new regions, there are compelling opportunities — and also challenges. One thing the industry agrees on: it's worth it.
Consider the lightning-fast speeds at which global online sales are growing (14.8 percent annually) when compared with total retail sales (0.9 percent each year), according to a Jones Lang LaSalle report. With global online retail sales expected to have topped $1.2 trillion in 2013, and 39 percent of the world's population already online, embracing e-commerce has become mission-critical for most retailers.
Seizing Opportunity, Overcoming the Challenges of International E-Fulfillment
Prioritizing retail logistics strategy will be key to unlocking opportunity in global e-commerce fulfillment. Here are five core issues retailers will face in international retail expansion, each posing its own unique challenges and opportunities.
1. Updating supply chain facility strategy
Challenge: Building new facilities isn't cheap, but relying on outdated, cookie-cutter facilities is likely to weaken market agility.
Opportunity: Incorporating specialized facilities such as mega e-fulfillment centers, presortation facilities, local delivery centers and returns processing centers can drive the logistical imperative to fulfill online orders efficiently and conveniently.
2. Investigating developing markets
Challenge: Developing countries may have inadequate transportation infrastructure outside their major cities.
Opportunity: Although infrastructure may currently be lacking, analysis shows that online sales in developing countries will increase over the next five years, and that by 2017, nations like Indonesia, India and Mexico are expected to experience the highest growth rates in B-to-C e-commerce sales. Meanwhile, in countries like Russia, where brick-and-mortar retail stores are also undeveloped in outlying areas, internet sales may well leapfrog physical retail growth.
3. Geo-mapping effective logistics clusters
Challenge: Proximity to the highest volume markets is associated with higher cost real estate.
Opportunity: The value of close proximity to a strong customer base and a sophisticated workforce may well be worth the higher costs. Moreover, logistics clusters located directly outside city centers can have easy access to customers via highway and public transportation.
4. Acting globally, thinking locally
Challenge: Meeting customers where they're located means different things in different places. A universal strategy won't apply; each market needs its own plan of attack.
Opportunity: Investigating local customs to meet preferred forms of convenience can drive success locally as well as innovation globally. For example, the U.K.'s recent trend of "click and collect' in brick-and-mortar locations is an idea that's gaining momentum globally; Australia's purpose-built parcel lockers are catching on; and India's pay-upon-delivery option is also a convenient solution in some locales.
5. Answering the call to outsource logistics
Challenge: Since the 1980s, when retailers began setting up their own distribution centers, retailers have generally been in control of logistics. This can become unwieldy when handling thousands of overnight deliveries to locations around the world.
Opportunity: Strategic partnerships can promote efficiency and customer convenience, as seen in the U.S., where third-party logistics providers are driving same-day delivery in secondary markets.
As they were in the 1990s when global sourcing emerged center stage, the challenges are real for retailers looking to expand online sales fulfillment to the global arena. Then and now, the key for retailers is to retool their logistics strategy to maximize potential in today's global e-marketplace.
Craig Meyer is the president of industrial at Jones Lang LaSalle, a professional services and investment management company. Kris Bjorson is the head of retail e-commerce distribution at Jones Long LaSalle.