Retailers compete for shoppers’ time and money online

Total e-commerce revenue in the U.S. exceeded $600 billion in 2019, up almost 15% year-over-year. More and more Americans are taking to their laptops instead of heading to the mall, and some legacy retailers are facing the pressure to adapt to the times or close up shop altogether. 

While retail e-commerce sales still make up a relatively small fraction of total retail sales in the U.S., that number nearly tripled from just over 4% of total sales in the first quarter of 2010 to over 11% of total sales in the first quarter of 2019, according to the U.S. Census Bureau. 

Amazon currently accounts for almost 50% of all e-commerce sales in the U.S. With e-commerce expected to continue its ascent at breakneck speed over the next several years, traditional brick-and-mortar powerhouses are rushing to optimize their supply chains for a digital future in order to remain competitive.

FreightWaves teamed with Redwood Logistics to survey a diverse group of shippers and get their take on the most important issues facing retail supply chains, as well as what they are doing to improve their transportation networks. The results of that survey were detailed in a recent white paper, “The New Supply Chain Imperative.” 

Researchers asked the shippers what percentage of their sales came from e-commerce or mail-in instead of physical store sales. The mean was 26% and the median was 15%. This reinforces the growing need to ensure supply chains are equipped to handle e-commerce sales efficiently and competitively. 

“The effects of rapid and continued penetration of e-commerce in the U.S. on trucking and supply chains are numerous and include more distribution centers (DCs) and warehouses, more less-than-truckload (LTL) volumes and lanes, more hub-and-spoke networks, more imports from China, more final-mile infrastructure, more drayage and the increasing shift of transportation assets in-house by Amazon and other leading retailers that are increasingly dominating the retail landscapes,” according to the white paper. 

About 80% of surveyed shippers reported a stronger focus on a great customer experience as the primary way they are combating the “Amazon effect,” with 20% committing to network redesigns and only about 10% focusing on two-day shipping. 

“As of now, the rest of the retail industry is mostly still playing catch up to Amazon,” according to the white paper. “Walmart and Target have made significant strides in e-commerce, but it is an open question as to whether their recent aggressive push may be too late.”

At the time of the survey, most shippers anticipated higher shipping costs and stronger sales growth in 2020. The survey, however, was conducted when the coronavirus pandemic was mostly contained to China and other parts of Asia. While a likely recession would have probably caused shippers to turn significantly more negative in their responses, the general trend to digital will prevail and Americans consumers will eventually rebound.

In fact, a global pandemic could put more pressure on retailers to amp up their e-commerce presence and fulfillment processes as consumers avoid venturing to physical stores.

About 35% of survey respondents said they expect artificial intelligence (AI) to have a significant impact on their business in the next couple of years, and over 15% said they have increased their technology spend over the past 12 months to prepare for the future. Almost 40% said they spent time and money upgrading and optimizing their existing technology last year. 

“Winning retailers of the next generation, in our view, will have a fast and efficient supply chain that can compete with the likes of Amazon; a strong online presence; competitive differentiation and consumer value propositions that stand out from America’s top retailers; products and services that consumers want in a convenient format; a global diversified sourcing base that is not overly dependent on one country and that keeps up with the times and employs state-of-the-art supply chain technology,” according to the white paper. 

Download the recent white paper from Redwood and FreightWaves, “The New Supply Chain Imperative,” to learn more about how shippers are competing with Amazon and preparing for a digital tomorrow.