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“One thing Amazon has done very successfully is they’ve owned the entire value chain. They’ve owned the last mile, the moment that matters. That moment is when the package arrives. Once you can own the moment that matters, you build a loyal customer base.” Forrester Research
A Race to the Last Mile
Strategically, compared to other areas of the business, the supply chain was a relative backwater for retailers. The conventional wisdom held that retailers only needed to keep pace with industry averages. But if the supply chain was once about the status quo for retailers, now it’s about disruption.
Retailers now realize that to succeed in the coming years, they’ll need to be able to offer home delivery and same-day-delivery services to compete in an increasingly competitive marketplace. The retailers that are taking this approach are experiencing dramatic increases in revenue, customer satisfaction, and market share.
What do today’s consumers want?
A recent large-scale consumer survey by Ernst and Young found that the single greatest influencer to purchase for today’s consumers was delivery terms, beating even influencers such as promotional offers, physical store design, and strength of website. Furthermore, almost 1/3rd of consumers were willing to pay a premium for instant or swift availability.
The consumer’s desire (and willingness to pay) for convenience helps explain the strategy that Amazon, a famously secretive company, is following. Most observers agree that its massive building spree of fulfillment centers (adding 50 new facilities since 2010 alone) is setting the stage for same-day delivery throughout the U.S. Even more extreme, in a widely covered announcement, Amazon recently announced a plan to use pilotless flying drones to deliver packages to customers within a half hour of placing an order.
Even if delivery by drone is still years away (or never happens)), Amazon’s actions are a clear signal to the other retailers that to satisfy the end consumer, they’ll need to own and deliver great service through to the last mile.
One key advantage that brick-and-mortar retailers have going forward is that they already have an existing distribution network in close proximity to the customer—the store. If you consider the top 100 retailers in the US, they have 100,000 points of distribution, with a square footage that dwarfs online retailers.
Editors note: This post is excerpted from a new white paper. Read the whole thing here: The Next Big Battleground for Retailers.
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