Driving from the Jacksonville, Florida airport into downtown, you pass by one of Amazon’s new distribution centers: a mammoth building of more than a million square feet surrounded by a 5,000-place parking lot. It is a reminder that while e-commerce is called digital, much of the goods sold and the process of getting it all to the buyer is distinctly analog. Making the same journey in from the northwest Arkansas airport to Bentonville, you pass a Walmart distribution center that looks almost the same on the outside, only it’s at least 20 years older. For The Robin Report readers, it is important to remember that it is the front end of the retail process that’s in question today. In other words, it\’s the head of the beast, not the body we are stressing out about. The body is holding up pretty well.
Supply chain management innovations have benefitted everybody in the world of big retail. The problems of getting the right stuff to the right place are still real and still in need of ongoing refinement, but progress over the past 20 years has been remarkable. As often reported in these pages, retail’s greatest accomplishment has been the unglamorous engineering of cost out of the supply chain. Go inside the warehouses of Walmart, Target, CVS, Kroger and Whole Foods—or Amazon—and you would be hard pressed to see any differences. Peeps, the biggest wrinkle in retail is figuring out what happens when all that stuff leaves the distribution center.
The Amazon Advantage
A few months ago, I signed up for Amazon Prime. I called it a personal lab experiment. I learned to cruise daily deals and for a month or two, ordered bits and pieces that fit into a home renovation project I was working on. I liked the Prime video offering, in contrast to Netflix. I got to download a bunch of films before I’d go on the road and pick and choose among them with instant viewing. The selection was not as good as Netflix, but for what I was looking for, on-the-go entertainment, it was just fine. As my renovation job slowed down, I asked myself what else I could be ordering. I had my first epiphany when I went to order toothpaste and realized the price on Amazon was noticeably more than I was paying at my local Stop & Shop.
As a student of human nature, I start from the basic premise that once we reach age 35 or 40, 80 percent of our weekly purchases are routine. We don’t need to agonize over brands of laundry soap, bottled water, or coffee. We know what we want. We still like to shop for personal taste-based items like meat, cheese, fruits and vegetables and bakery items. We want the option to fulfill our routine commodity purchases quickly and cheaply, and do the shopping and choosing in-store that gives us pleasure. Price aside, the auto-replenishment feature of Amazon Prime is a no-brainer when it comes to convenient commodity purchases.
The Big-Box Advantage
Industry data clearly show that most big-box merchants can compete with Amazon successfully on commodity items if the customer is willing to pick them up at the store. Walmart and Kroger have the trucking part of the distribution chain down cold. The challenge is to fulfill three critical last-yard steps for customer pick-up.
Organizing the individual order at the back of the store. For nonperishables, it\’s easy. What is intriguing is that pick-up at the store could eliminate e-commerce’s dirty little environmental secret, which is the profligate use of cardboard. If the order is packed in a returnable plastic bin, cardboard consumption could be cut by more than half.
The timing on the pick-up. Each hour that passes from the time that bin is ready to be picked up and it getting picked up is money lost.
Making sure the bin gets to the back of the customer’s car as quickly and painlessly as possible.
Step one is not rocket science. What happens in the distribution center and in the back of the store are streamlining engineering and personnel issues. French and Russian merchants are leveraging their private warehousing and trucking systems as fulfillment engines for e-commerce, not only their own merchandise but also in contract for others. Their use of recycled plastic bins is common. The pick-up process in many other countries is scheduled online, with customers choosing their pick-up time windows. A small charge is sometimes levied if the time window is missed.
Calling for Delivery Innovations
Mainstream America doesn’t have doormen to accept packages. Drones may work in exurban settings, or at gated mansions, but the concept of drone service to the Levittowns of America is hard to imagine. UPS, FedEx and USPS are working well, but secure delivery issues persist. For non-doorman apartment dwellers and many living in single-family residences, home delivery is problematic. The Amazon boxes or lockers have not taken off. And even with the lockers, we still have to lug the stuff to the trunk of the car. We need innovations!
A New Parking Place
If we visit the strip mall where so much of American weekly consumption is anchored, we can see where step three is an ongoing problem. American parking lots are chaotic. On a busy late Thursday afternoon, the competition for a prime parking location can be fierce. Conversely, on Monday morning the walk from your car to the front door is short. But it’s those other times of the week that the walk can be frustratingly long. Parking lot management is passive. Yes, some handicap spaces exist, but mostly it’s asphalt, strips of paint, a few tired signs and random shopping cart holding pens.
At the aging strip mall the basic layout of the pad is still parking in front, stores two-thirds of the way back, and a narrow corridor in the rear with trucking bays.
If we could blow up the pad, we might be able to do something radical. But we are stuck with the footprint and we need new ideas.
With a parking redesign and active management, the Krogers, Walmarts, Whole Foods and Best Buys can be given a whole new lease on life. The following blue-sky ideas are not proven concepts. What’s important is to think differently, with solutions anchored in logic.
- Place digital signage for sections of the parking lot that changes by day of the week and day part. Prime parking spots during commuting hours are reserved for store pick-up; let’s call it a 10-20 minute window. You can get to the dairy case and also get your bin. The average time spent in that strip mall declines by 40 percent.
- Place a pick-up center at the edge of the parking lot away from the stores. The center could be designed as a series of moveable containers or even a repurposed shipping container with openings on one side. Shoppers have the option, based on their online notification, to pull up to the pick-up center and have their bins loaded directly into the back of the car. While you pick up a full bin, you can drop off your empties.
- Most American big boxes are looking to shrink their footprint. One innovation might be to create a corridor down one side of the box connecting back of the store to the front façade and parking. That alley facilitates the creation of the pick-up zone at the front of the store.
The American shopping trip for weekly purchases is crying for reinvention. Imagine if we could stop off on our way home from work, adding only ten minutes to our commute, and get what we need, saving money in the process. Wouldn’t that be a winning formula?
To get there, we need a better partnership between big boxes and their strip mall landlords to manage usable space. We also need better master-plan mall redesigns that are based on human behavior and convenience, not impersonal cost efficiencies. We can reimagine the parking lots as distribution sites. We can re-engineer the pick-up experience. We can promote the environmental advantage of pick-up over the Amazon cardboard shipping eco-nightmare. We can use ingenuity instead of expedience. Or even better, we can ask our customers what they actually want to make their pick-up experiences better. The future of shopping is about technology applied to customers’ lives, preferences and pocketbooks.