THE LAST STOP BEFORE THE LAST MILE

My first real job began when I was 12 years old. The exalted position was in a local neighborhood grocery store, long before the proliferation of supermarkets in the country. “On-line” ordering was very popular then, and my primarily responsibility was to take orders over the telephone, laboriously record them in a ticket book, take the necessary items off the shelves and load them into two bushel baskets attached to my bicycle. From there I would embark on my same day (often same hour) last mile delivery. From my basket to your kitchen table – at that time there was no better service available than that from your local grocery. For most other products it was necessary to visit a retail store and take your items with you, or in the case of such items as appliances and furniture, have them delivered at a later date.

The retail environment began to change rapidly, however. Consumers were enjoying the on-site shopping experience more, and retailers were happy to accommodate them. Manufacturers concentrated on making their packaging more attractive and eye catching than that of their competitors. In the early 1950’s, credit cards were introduced. While they may not have increased retail sales, they made it possible for consumers to buy what they wanted when they wanted it, not necessarily when they could afford it. An economy that could not operate without cash morphed into one that could not operate without plastic.

New shopping malls continued to open around the country. Some were huge and included restaurants, movie theaters, and other forms of entertainment. The first indoor mall opened in 1956, appealing to shoppers in all kinds of weather. In 1962, however, an Arkansas retailer named Sam Walton opened the first Wal-Mart store in Rogers, Arkansas, and forever changed the retailing landscape. That same year, Target and K-Mart opened their first stores, and all three companies had a strategy of providing lower prices through lower costs and higher turnover. As the country entered the economic recession of the 1970’s. customers demanded even lower prices, and the discount retailers grew exponentially.

In the 1980’s, the so-called “category killers” and club stores reduced prices even more. Costco and Sam’s were started in 1983, and joined the rapidly expanding Wal-Mart, the four year old Home Depot, Best Buy, and others, siphoning off more of the consumer dollars.

In the late 1990’s entered another huge game changer. By 1999, the whole country seemed to be caught up in the potential and mystique of the internet. The first few years of on-line ordering were disastrous for many, however. The problem was that many, if not most, of the internet retailers had invested enormous amounts in marketing and technology, and virtually none in distribution systems. During the Christmas season in 1999, nearly 50% of all online consumers experienced fulfillment problems. Of course, most of the issues are behind us and 2014 internet sales were over $304 billion.

And now we have perhaps the biggest retail supply chain game changer of them all – Amazon.

Reinforced by the best technology available, with a huge network of distribution centers, Amazon seems determined to provide the best customer service of any retailer. Same day delivery is being tested in various cities, and we all have heard about the drones. With their network of over 100 distribution centers, same day delivery will be relatively easy in those cities where they are located. Delivery resources such as Uber and other companies – even bicycle messengers are being tested currently. (It makes me wonder if I should have held on to my bicycle.) But what about the competition – those companies that operate with far fewer distribution centers?  They are learning that the real problem is not the much discussed last mile delivery. It is the point from which you are trying to provide it. Where are going to locate your inventory? Right now, many of those companies, including Wal-Mart. are exploring filling on line orders from stores. But most of the stores were designed for on-site shopping and have limited space for shipping operations. As I have written before, I feel strongly that this is a wonderful opportunity to partner with a logistics service provider and ship from their facilities.

The most interesting point to all this is the confirmation that there are few new delivery ideas, but old ideas can become effective again with technology and fresh thinking – and a new bicycle.

Written By: Clifford F. Lynch