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Jones Lang LaSalle cites five trends forever transforming the supply chain essential to delivering consumer goods worldwide
CHICAGO, May 21, 2013 — While the world undergoes a massive transformation through the break-neck speed of technology advancement, the retail industry is playing catch up. With omni-channel retailing and consumer demands raising the bar, retailers must compete on service to stay in the game. Demands, such as same-day delivery or ship-from-store, require retailers to adapt their supply chain network and store formats sooner rather than later. This transformation means that in five years, the retail supply chain may be unrecognizable from the infrastructure that exists today.
“Brick-and-mortar stores are becoming more than just a point of sale – they’re an essential component of the supply chain as pick-up /drop-off locations for e-commerce orders,” said Kris Bjorson, International Director and leader of Jones Lang LaSalle’s Retail/e-commerce Distribution group. “This additional role offers the retail store another sales opportunity to entice customers to add to their order, or to try new products.”
“Never has change come so fast, and so furious, in the history of retail,” says Greg Maloney, Americas CEO and President of Jones Lang LaSalle Retail. “The good news is that both retailers and their supply chain partners are responding, evolving to rise to the challenges and opportunities posed by the omni-channel paradigm, the rise of 3D manufacturing, changes to tax law, and being creative with remaining retail space.”
JLL’s Retail/e-commerce Distribution experts are attending the International Council of Shopping Centers (ICSC) Real Estate Conference (RECon) in Las Vegas this week and have identified five key retail supply chain market movers:
#1: Omni-channel retailingThe omni-channel distribution strategy has become a reality for retailers, and it means seamlessly serving customers via all available channels such as web, mobile, in-store, catalogue and so on, typically fulfilling same-day and next-day delivery promises. These individual shipments to customers are vastly different than replenishing the weekly inventory in a store on a weekly basis. In short, online and mobile delivery has made every customer into a point of sale, and every distribution center into an individual customer service location.
The implications to this new way culture include changes to the supply chain network, location selection strategy, distribution center design and materials handling infrastructure. “Currently, the majority of retailers rate themselves only a three on a scale of 10 when it comes to confidently implementing an omni-channel strategy,” said Bjorson. “There is still much work to be done to align retailers’ supply chain with customers’ demands. Retailers are still figuring out how to form a seamless supply chain – where to locate their distribution centers, how to reach their customers and stay in the game.”
#2: Internet sales tax legislation: “No new taxes?” Levelling the playing field between brick-and-mortar stores versus internet-based retailers is the goal of the Marketplace Fairness Act, the proposed federal legislation that expands the collection of sales tax by online retailers and is overwhelmingly popular in the Senate. Even though it means new taxes for online retailers – it actually focuses on tax collection, not the new taxes themselves. While the industry knows the changes that result from the final legislation will be profound, the jury is out on how the specific implications will play out—and who the winners and losers will become.
#3: 3D manufacturing mayhemWhat if you could print your very own shoe? Or snowboard? Or face? Well, now you can, and the technology that enables it – 3D printers (or additive manufacturing) is getting simpler and more user- friendly. 3D printing is beginning to have a real impact on manufacturing, the supply chain, retail and ecommerce. The breadth of creative possibilities are staggering, as new products become cheaper to bring to market, me-tail-driven consumers get to design more of their own uber-customized products, and some brick-and-mortar stores offer walk-in customers tools to create precisely the product they want.As 3D printing matures and decreases in price, it could mean that retailer could promise “No wait time” to bring products to market; more innovative products thanks to lower R&D; smaller, more specific-content shops; and super-customized products. Wohlers Associates predicts the additive manufacturing industry (3D printing) will be valued at $3.1 billion worldwide by 2016 and $5.2 billion by 2020.
#4: Category killing - where did all the books go?“What if you didn’t have to move a product at all—and your supply chain was digital, not physical?” asks Bjorson. The convenience of digital devices and advancement of internet speeds enable books, music, computer games and other entertainment to be download-only purchases. This transforms the retail supply chain in a unique way. “With every innovation that makes it possible to deliver entertainment and other once-physical goods digitally, prices can decrease as the infrastructure needed to ship, store and move goods is inherently eliminated, replaced by only marginally increased data storage and management costs.”
“Retailers are acutely aware of the products that have been rendered obsolete due to digitalization,” said Bjorson. “Therefore, when locating Big Box stores, a key consideration is the mix of products valued most by local customers and the location’s growth potential.”
#5 Adaptive Re-use – being creative with remaining space“As technology has changed the way we shop, how we deliver and what we buy, it has also left retailers to think about adapting remaining vacant space,” said Maloney. “Landlords in particular have found creative ways to fill their space and retailers have found new avenues for sales.”
“For example, we have seen a rise in pop-up temporary stores where large brand retailers may showcase a new product or a guest designer to create buzz and drive sales. We have also seen former retail space being used by schools, churches, clinics, fitness centers and dental offices. As the sector changes, retailers and retail landlords must be creative,” he concluded.
**Fig. 1: shows which categories may expand online – and disappear from a Big Box warehouse near you.
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About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.