As consumer expectations for e-commerce continue to rise, retailers are under increasing pressure to enhance their logistics operations. Take delivery, for example: Amazon's aggressive push to one-day shipping, which cost the company nearly $1.5 billion in Q4 2019 alone, highlights the significant investments required to meet these demands.
As brands like Walmart expand initiatives such as its InHome delivery service, successfully competing in this space means retailers must ensure that their delivery and inventory processes are streamlined and scalable.
Complicating this issue is how the rapid growth of retail media advertising is fueling the e-commerce boom. It has set off a domino effect in online retail, impacting all aspects of operations. Every click and purchase driven by retail media produces a ripple that adds to the pressure on supply chains and fulfillment centers. For brands, this can be devastating if their advertised item is out of stock, as the retailer might suggest an alternative brand's product, undermining brand retention, not to mention advertising performance.
To protect and grow market share, retailers must address the logistical challenges caused by the surge in retail media advertising and align technology to address this complex interaction.
Strategies for bridging the gap between delivery and retail media
To navigate the complexities of retail media's rapid growth, retailers must find ways to align their advertising efforts with their logistical capabilities. This alignment is crucial for minimizing risks such as wasted ad spend for advertisers and customer dissatisfaction — both of which are huge risks for retailers.
A survey by CommerceNext found 81% of retailers consider logistics and fulfillment to be their biggest challenge in the face of growing e-commerce sales. This highlights the pressing need for retailers to adapt and innovate to meet their customers' evolving expectations.
The following are five ways retailers are trying to adapt to this balancing act:
1. Retailers are implementing real-time inventory management by utilizing advanced technologies like AI and IoT to monitor stock levels and predict shortages. These systems allow for dynamic adjustments in advertising strategies based on current inventory, minimizing the risk of promoting out-of-stock items. Leveraging real-time data can significantly enhance overall customer satisfaction, reducing stock-outs by up to 30%, according to McKinsey & Company.
2. Enhancing data integration and transparency is another crucial strategy. Investing in robust data integration platforms that provide end-to-end visibility across supply chains can improve delivery accuracy by 25%, according to Bain & Company. Transparent data sharing between advertising and logistics departments ensures alignment and reduces logistical hiccups.
3. Retailers are optimizing their delivery networks by employing route optimization software and leveraging local fulfillment centers to reduce delivery times. Partnerships with third-party logistics providers and local delivery services have effectively reduced delivery costs. Companies using advanced routing solutions have seen delivery costs decrease by 15%.
4. Developing flexible fulfillment options such as buy-online-pickup-in-store , curbside pickup, and same-day delivery provides customers greater flexibility. A survey found that 75% of consumers expect multiple delivery options, which directly impacts their shopping choices. This improves customer satisfaction and also helps retailers manage delivery loads more effectively.
5. Retailers are penalizing and incentivizing advertisers by establishing clear guidelines, including penalties for promoting out-of-stock items or causing excessive shipping delays. Aligning advertising with inventory can boost ad effectiveness by up to 20%. Retailers offer incentives for advertisers who consistently align their promotions with available inventory and meet delivery expectations, ensuring that brands are not paying for clicks only to have the system suggest an alternate branded product due to stock issues.
By implementing these strategies, retailers are actively working to bridge the gap between retail media and delivery operations, ensuring a smooth and efficient customer experience even as e-commerce continues to grow.
Conclusion
Since the first three months of the COVID-19 pandemic drove the equivalent of 10 years of e-commerce growth, the stakes have never been higher for retailers. They face myriad challenges in optimizing their businesses to handle the expanded demand and associated complexity.
Retail media represents lucrative, high-margin revenue for retailers. However, the channel's rapid growth brings opportunities and challenges, requiring better data integrations and standardization.
Aligning inventory and fulfillment methods with ad-serving technology helps prevent the promotion of out-of-stock items, reduce wasted ad spend, and improve customer satisfaction. As the retail landscape continues to evolve, ongoing adaptation and investment in technology will be essential for maintaining a competitive edge and ensuring customer satisfaction.