The Rapid Growth of Online Shopping and Changes to the Longstanding Business Model
Filed under: Industry Trends
Coordinated logistics and supply chain management systems are integral to an organisation as it can contribute to the reduction of costs, as well as ensuring the enterprise runs as efficiently as possible. This is no different for online businesses.
Due to the increase in the popularity of online shopping, it is becoming apparent that the way in which retailers interact with their customers is changing. The rapid growth of online shopping is driving structural changes in the retail model. As demand grows many businesses are now assessing their e-commerce presence and are weighing up the costs associated with going online.
This week’s blog will explore not only the effects of online shopping to the operation of the business but also the supply chain management systems.
Online Sales Statistics
Growth in online sales continues to outperform that of traditional retail. The past year has seen Australian’s spend $12.6 billion on online shopping. The National Australia Bank (NAB) Retail Sales Index shows that in the period between November 2011 and November 2012 online retail sales grew 27%, in comparison to the previous year.
Factors driving the growth of online shopping in Australia:
• Consumers are seeking greater value in their purchases
• There is a greater variety of goods
• The increase of widespread usage of mobile devices (increase in convenience)
• Continued strength of the Australian and New Zealand dollar
• Increasing level of sophistication and comfort with technology and the internet amongst consumers across all age groups
• Use of social media by both consumers and retailers to drive brand awareness of group buying sites
Key changes to warehousing management:
Due to the surge in online consumer demands, warehousing management has seen three key changes:
1. Warehouses require the ability to carry more items or add more warehouse inventory
2. There is a requirement to order pick faster or increase order picking speeds
3. Items must be shipped more quickly
Maximising your return online:
As businesses increase their online presence and availability, it is important to note that there are five key areas to consider in regards to maximising your return online:
1. Tighten up your supply chain.
By focusing on reducing waste in the supply chain you can easily decrease costs:
• Ensure speed and accuracy of picking stock
• Minimise double-handling and transportation between sites
• Engage cost effective packing processes and packaging
This will not only ensure costs are reduced but will also speed up the dispatch process to ensure the customer receives their purchase more quickly.
2. Consider alternative shipping methods.
Implement supply chain management techniques such as ‘drop shipping.’ This is where the retailer doesn’t keep products in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the products directly to the customer.
3. Keep shipping costs low.
Utilise organisations that can provide you with logistics solutions that monitor and provide you with the best pricing options for your carrier requirements.
4. Consider alternatives to direct shipping.
Other options to consider are “buy online, collect in store” or an alternative location. This may reduce supply chain costs, whilst also providing new and flexible ways to interact with your customers.
5. Re-evaluate costs.
By regularly re-evaluating costs within your enterprise, you may be able to decrease or eliminate any wasteful practices within the supply chain process. Ask questions regarding how much it costs you to pick, pack and dispatch your average transaction package and review the costs of each size point of packaging regularly. You may be able to maximize your return on investment.
The online world is changing how both consumers and enterprises conduct business. From changes to supply chains, stock management and logistic operations, costs can be cut and return on investments can be increased.
Has the increase in popularity of online shopping affected your business? Do you think it will affect your business in the future?
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