How Online Shopping Has Changed Retail Distribution

By Haley Bass | 12/15/2017

The internet has improved access and convenience for a wide variety of needs -- including shopping. A report from BigCommerce revealed that 51% of Americans prefer to shop online, and that e-commerce is growing 23% year-over-year. This shift has not only caused sales to drop in brick-and-mortar stores, it’s also changed the structure and logistics of distribution centers.

Between changes in inventory management, fulfillment costs, and shipping services, the retail industry has had to make several adjustments to meet the new demands of online shopping. These adjustments impact the design and management of distribution centers, and the logistics behind deliveries.

Managing Inventory in an Online Market

With a new channel for shopping comes a whole new set of needs for inventory management. There’s a larger volume of product moving in and out of the distribution center, and an unpredictability that didn’t exist in the traditional shopping market. Distribution centers have to adjust to these changes with better resources and strategies.

Tracking Inventory

There’s a lot of movement in a distribution center. Inventory comes in from the supplier, goes out to both stores and individuals, and is sometimes returned or exchanged. Between all the ins and outs, the center needs to ensure that the number of product in the warehouse is exactly the amount of product that should be there. It can get complicated. To make tracking easier, distribution centers can invest in automation technology. If everything is scanned as it enters and leaves the warehouse, the data is recorded and saved in real-time. This reduces the risk of miscalculating and getting behind on records.

Adapting to Unpredictable Volume

It was easier to predict how much inventory you’d need in a store when you could track the purchasing behaviors of consumers at each location. Managing individual shipments across the country (or world) makes it much more difficult to predict how much inventory is needed at any given time. With workloads fluctuating, it’s also hard to know what staff to retain. To tackle these unpredictable buying patterns, many distribution centers are using technology and robotics to increase efficiency, accuracy, and productivity. Management systems are expanding and becoming more flexible, and warehouse employees are given new training to adapt to these changes.

Meeting a Wider Spectrum of Needs

Without the physical confines of a brick-and-mortar building, stores are increasing the variety of product they offer to remain competitive. More product means a need for more space. Companies are trying to use every square inch of their distribution center space, redesigning them with higher racking and narrower isles. This new design requires new tools and technology, like forklifts, conveyers, sorters, etc. If employees aren’t safe, they can easily be injured trying to reach for something too high up or manage a machine they aren’t properly trained to use. Employers need to ensure that the right safety precautions are put in place to meet these changes, and they need to have an injury care plan in place in case of an accident.

Keeping Customers Happy and Costs Low with Deliveries

Shipping is one of the biggest changes with online shopping. Instead of working on a B2B level where shipments move from the distribution center to the store, warehouses are now shipping directly to consumers. The big impact this makes on fulfillment costs and logistics is forcing companies to evaluate their distribution structure, including where distribution centers should be located.

Making Faster Deliveries

With online shopping, good customer service means good delivery service. People are more likely to buy from a company that offers fast shipping times at low costs, including returns and exchanges. To meet these demands, companies are looking at different ways to better reach their customers, from adding regional distribution centers to using an omni-channel distribution method. With omni-channel distribution, items are shipped from their nearest locations. So, if the warehouse is in California and the purchaser is in New York, the company could see if the item is at a physical store that’s closer to the purchaser. This can reduce delivery times and costs, but also comes with new logistical challenges to manage.

Reducing Shipment Costs

To reduce shipping costs for consumers, companies may face increased costs on the distribution end. It costs more to ship individual items to individual homes than large volume packages to stores. And to make faster deliveries and reach more customers, companies have to make changes that come with big costs -- they just have to decide which costs will have a greater return.

Some of the options companies have include:

  • Adding regional distribution centers (increased footprint but paying more for rent and workers)
  • Moving the distribution center to a larger city (better access to large populations but paying higher rent and salaries)
  • Moving the distribution center to a less expensive location (paying less for rent and salaries but more for shipping)
  • Using omni-channel distribution (increased access to consumers but more challenging logistics)

Where do we go from here?

All we can predict for the future of retail is that things will continue to change. From robots replacing workers in distribution centers, to drones delivering packages, there’s likely going to be new logistics, costs, and challenges to overcome.

While we can’t predict the future, employers can prepare their workplace to thrive in the present. As companies consider what changes they want to implement to meet the new demands of online shopping, they should also consider how those changes will impact their employees. From executing new training and safety standards, to developing injury care plans and automation programs, employers can take steps now to keep their workforce safe in a changing environment.

The good news is you don’t have to do it all alone. Concentra will partner with you to protect your employees, from preventing injuries to treating them. Learn more about work safety for the retail industry in our white paper, or talk to a Concentra work health expert to learn what services we can provide to keep your workforce safe and healthy on the job.