International Retailing and Retail Logistics Challenges

International Retailing is seeing exciting times. With globalisation and availability of new market opportunities, we see a lot of aggression from International Retailers in consolidating their operations within the country and setting up new outlets in emerging markets such as South East Asia. International buying and supply chain has undergone a series of evolution since 1990s and currently the International Retailers are moving towards consolidating their procurements and buying through Global exchange of Suppliers.

Globalisation and Internet revolution has opened new vistas for International Retailers in terms of E Commerce and Trade opportunities. Online shopping has become the new channel of sales. With increasing penetration of internet in all homes, the volume of online shoppers is steadily increasing. On time committed delivery is the key driver of this channel coupled with availability of complete range of SKUs available at the store.

Tesco offers a guaranteed 2 hour home delivery for all of the online orders in UK. When the Retailers are faced with making committed deliveries to its customers across the country, they are faced with several challenges in operations. The challenges faced mainly are to do with back end store operations that manage order fulfilment and the last mile distribution.

As the Retailers are committed to delivering as per their promise, most of them manage the logistics of transportation and bringing back the delivery boxes in house. Making individual deliveries to Customers is an expensive proposition. Studies in UK reveal that each individual delivery can cost upto $13-15 whereas the Customer is charged between $5-7. This means the residual cost is borne by the Retailer Company.

In order to tackle this delivery problem, Retailers have come up with several solutions that are being tried out. Some have set up local satellite collection centres from where the Customers can collect their orders at their convenience. In some cases the apartment buildings provide a securing system for the unattended delivery boxes. LeShop in Switzerland has opted to use the National Post to deliver all of its orders to the Customer’s homes the next day.

The day is not far off when the Home Delivery or Secondary Distribution solution that is cost effective and workable will be in place. The trend of growth in this area would be similar to the way Third Party LSPs have developed Primary Transportation and Warehousing solutions. The way that the local transportation as well as the courier companies work can be replicated to home delivery process too.

Third Party secondary distribution Companies are setting up and operating common home delivery system for multiple Retailer Companies. They are setting up consolidation centres at the Point of Pickup and distribution centres at local point of delivery, from where home deliveries are affected. Dedicated tracking systems are implemented and are interfaced with the Retailer’s system to ensure instantaneous data exchange. Use of RF at the point of delivery ensures online confirmation of Proof of Delivery.

With availability of Third Party Service providers who can provide the required quality and committed services and are equipped with reliable IT systems to ensure seamless integration with Retailer systems, the costs of home deliveries will drop drastically, making it a profitable venture.

Online shopping is the way for the future of International Retailing. On domestic deliveries front, the Customer’s tend to prefer immediate deliveries within two hour window and are yet to accept a late and unattended delivery system. As time goes by, the model will mature and solutions will fall in place. Next decade is going to be a learning period for International Retailers in understanding and predicting the growth of Online Shopping and E Commerce as well as developing international solutions to cater to the E-Customer’s demands.