Learning from Europe for competitive advantage in South Africa E-FULFILMENT

Transcription

1 Learning from Europe for competitive advantage in South Africa E-FULFILMENT Michael Marienfeld, Director Europe, The Logistics Business/Fortna

2 Learning from history

3 Contents Context Europe v South Africa different starting positions, drivers & plans Looking back to plan for tomorrow food v non-food experiences (R)evolution caution or leap-frog for advantage? Amazon the game changer that cannot be ignored in the longer term Suggested Key Success Factors some must do s for success

4 UK/Europe compared with South Africa Internet Users SmartPhone/4G cover ecommerce Shoppers Customer expectations 821m (74%) v 6.4m (10%) Wide v <30% 81% pop. v >R30k/mth Next/same day v overseas/convenience Cash & Credit Transport Infrastructure Delivery Addresses Omnichannel DC/CC/PP v Cash mainly Wide choice v limited Post-codes v City only Established v Embryonic

5 UK/Europe Compared with South Africa Area of disparity Internet Users SmartPhone/4G cover ecommerce Shoppers A more level playing field Click & Collect Cash & Credit Transport Infrastructure Delivery Addresses Mobile Payment

6 Top 10 European E-tailers (web sales) Retailer Growth p.a. Country Category ~20.0% 8.3% 11.1% -2.2% 7.9% -5.3% 22.8% 25.7% 22.7% 9.0% Mass Merchant Apparel/Accessories Mass Merchant Office Supplies Computers/Electronics Housewares Mass Merchant Apparel/Accessories Food/Drug Mass Merchant

7 Contents Context Europe v South Africa different starting positions, drivers & plans Looking back to plan for tomorrow food v non-food experiences (R)evolution caution or leap-frog for advantage? Amazon the game changer that cannot be ignored in the longer term Suggested Key Success Factors some must do s for success

8 UK Retail: yesterday, today and tomorrow Every 10 years a retail revolution digital mobile retail revolution for today Spirit of the time 1950s: Reconstruction & economic miracle 1960 / 1970: New Lifestyle 1980: Hybridity & multi-optionality 1990: Mass individualism 2000: Digital Lifestyle Today Mobility Lifestyle Formats Corner shop Supermarket Department store Specialty store Mega malls E- commerce M- commerce Technology (*) ONS 2016

9 Overview: UK egrocery strategies Source: TLB/Fortna ecom strategy projects; AT Kearney 1 2 Store to home (Grocers use existing stores to supply online shoppers) Warehouse to home (Online start-ups (and some bricks-andmortar) deliver from warehouse Click & Collect (Online shoppers collect goods at grocery stores) Drive-through (Some grocers are adopting this time saving approach) Standard in UK Early adopters: Tesco Late adopters: Morrison's 2 Introduced in GM first (Argos & B&Q) Late in UK (due to Store to home) but now established 3 Ocado Specialist services New entrants 4 Specialist service now growing LeDrive Major grocers

10 UK egrocery: 7 long days, tight time slots & cheap/free Retailer Min spend Mon-Fri Sat Sun Slot times Bag-less? No min; 4 if < 40; 1-6 > 40 25; var. costs; free > 100 8am-11pm 9am-11pm 9am-10pm 8am-11pm 8am-10pm 8am-10pm 25; var. costs 6am-11pm 6am-11pm 6am-11pm 40; var. costs 40; var. costs; free > 70 60; free delivery 7am pm 6am pm 6am-11.30pm 6am-11.30pm 6am-11.30pm 6am-11.30pm 9am-10pm 9am-10pm 9am-6pm 1 or 4 hour delivery slots 1 hour delivery slots 2 hour delivery slots 1 hour delivery slots 1 hour delivery slots 1 hour delivery slots Yes Yes Yes No No Yes Source: Mintel 2016

11 U.K. egrocery Evolution ( today) Phase Description Advantage Store fulfilment Dark store laid out exactly like a customer store Dark store, similar processes with simple conveyors Similar picking but automated buffer store Full WMS, automated pick-face replenishment, eventually centralised with more automation Lowest capital & quick to implement, high availability, but store congestion Still low capital, extra capacity & addresses availability and congestion Improved picker productivity Productivity, faster van loading, more flexibility, smaller / multilevel, late order cut-offs Further pick productivity and more efficient inbound, replen & outbound Future?

12 UK Grocery Discounters hesitating to go digital? The challenge for Lidl and Aldi On-line grocery retailer, Ocado, yields an average basket size of 110 from 48k SKUs Can Lidl and Aldi grow on-line basket sizes due to limited ranges? Lidl announced trial In UK, average cost to pick and deliver grocery order = c 15 (*), yet charge 0-7 (*) Source: Bernstein Research

13 Emergence of efood specialists in the UK Specialist offering gaining wider acceptance Food convenience and experience: Graze.com Banquet in a box Gourmet Foods Gousto Vegetable deliveries cut out the middle man: Freshfields (local) Abel & Cole (organic into your kitchen) Online wine / wine-clubs / special interest: Naked wines Laithwaites New models: Deliveroo Crowdshipping

14 UK Non-Food Smaller Items (Parcels) UK 2017 Retailer Argos Currys ASOS Amazon JLP Delivery deadlines Same-day up to 4 days Next day to 5 days Delivery times 7am-10pm Varies by day Next day to 3 days Varies but 1 hour slots Same day to 5 days N/A but incl. evenings Next day to 5 days 7.30am-6pm Weekends? Saturdays Yes both days Yes both days Yes both days No Times arranged with customer? Yes If paid for 1 hour slot on chosen day Anytime during work day No Same day? Yes Yes No Yes but 9.99 No Click & Collect? Yes No No No Yes but fees Collect+ or similar service? No No Yes but fees Yes but fees Yes but fees

15 UK Non-Food the (perceived) need for speed UK population heat map Carrier hubs require all freight by for next day to most post-codes; slot premiums Proximity to hub and pre-sorts key for later cut-offs With sufficient post-code or regional volumes, hubs can be bypassed to save processing time outbound sorter design implications

16 Non-food clothing pure online retailer Necessitated end-to-end process time gains via technologies 1 Minute 15 Minutes 1.5 Minutes Start = Pick Instruction Large UK pureplay (catalogue to ecommerce) 0.5 Minutes Order Cycle Time 45 minutes v 3-4 hours Essential for late (22:00 hrs+) next day order cut-offs 4 Minutes 21 Minutes Essential to remain competitive and retain customers 12 M /min. Average Distance of 50M = 4 min. 100,000 parcel per (average) day 12 M /min. Average Distance of 250M = 21 min. Finish = Picked To Postcode 30 sec 0.5 Minutes 15 Minutes

17 UK Non-Food Larger Items (2 Man) UK 2017 Retailer Argos Currys Ikea Habitat JLP Cost of delivery 6.95 std to next day time slot Free std to Sat time slot 35 Free if > 500 or 9.95 Free std > 50 to 19 2 hour slot Delivery times 7am-6pm 7am-8pm Parcelforce 7am- 6pm N/A 7am-9pm Weekend deliveries? Yes both days Yes both days Yes from store Saturdays No Times arranged with customers? Text 2-hour windows; four paid slots Four time slots if paid for 1 hour before crew contacts plus online track No, limited to online crew tracking Standard slots plus crews call ahead

18 Ave. RoS per week UK Non-Food 2 Man Inventory Issue Rate of Sale v Stock Cover (weeks) v Stock by cube Category Ave. no. of weeks stock cover A B C Ave. no. weeks stock cover Ave. RoS per week Total cube in stock A , B , C , Long lead times (Far East sourcing, MOQs, poor forecasting and lack of supply chain visibility) causing large over-stocks AND some availability issues big ticket items can mean lots of warehouse space needed with low productivity!

19 Established major retailer getting into ecommerce late! Major UK retailer (non-food site) Opened 2013 for 70:30 retail : ecom Business wants 33% total sales from e-com ASAP Site now at 70:30 ecom : retail

20 Recent models: Click&Collect & Pick-Up-Drop-Off (PUDO) Free to use for customers Drives foot traffic into store Synergistic logistics Single inventory pots Real omni-channel Convenient for customers Receipts & Returns points Open late convenience stores Stations, universities, business parks Some locker banks

21 The Issue of Returns The challenge of Returns Often should be viewed as the largest supplier Speedy re-processing is crucial (hours not days/weeks) Re-processing is expensive and often messy Try-before-you-buy initiatives will only increase Consumers expect free Returns even when intentional

22 Main challenges still faced by Euro e-tailers (*) Twenga 2016 survey Acquiring customers Business profitability Competition with others Brand visibility 13% 13% 23% 27% Customer support Site technical development 6% 7% Online performance reporting 5% Logistics Economic environment 2% 3%

23 Contents Context Europe v South Africa different starting positions, drivers & plans Looking back to plan for tomorrow food v non-food experiences (R)evolution caution or leap-frog for advantage? Amazon the game changer that cannot be ignored in the longer term Suggested Key Success Factors some must do s for success

24 Which offers the best starting point for your business? Phase Description Advantage Store fulfilment Dark store laid out exactly like a customer store Dark store, similar processes with simple conveyors Similar picking but automated buffer store Full WMS, automated pick-face replenishment, eventually centralised with more automation Lowest capital & quick to implement, high availability, but store congestion Still low capital, extra capacity & addresses availability and congestion Improved picker productivity Productivity, faster van loading, more flexibility, smaller / multilevel, late order cut-offs Further pick productivity and more efficient inbound, replen & outbound Future?

25 Taking advantage of technology to address issues? Automation Voice Secure Lockers RF Tablet Click & Collect

26 Learning from others? Geography Returns Brand Select locations Urban centric Expand carefully Speedy processing Understand costs Market carefully Understand total cost to serve Me too or different? Appreciate consequences

27 Contents Context Europe v South Africa different starting positions, drivers & plans Looking back to plan for tomorrow food v non-food experiences (R)evolution caution or leap-frog for advantage? Amazon the game changer that cannot be ignored in the longer term Suggested Key Success Factors some must do s for success

28 DC global growth: not just a U.S. issue US k jobs (33% UK); 1,300 local DCs in EU EU 73 IN % YoY GROWTH Global +109 in in 2017 When will they enter South Africa?

29 Changing the way people buy and sell Just Ask! 50% Marketplace Merchandise Sales Convenience Speed Price Selection

30 Price Comparison Mobile-friendly Raising customer expectations across all industries CONVENIENCE Fast Credits Free Returns Free Shipping Lowest Price Assortment PRICE SELECTION Delivery Tracking Order Status Inventory Visibility Communications Fast Delivery SPEED

31 Driving greater competition for labour

32 Amazon is not even the biggest threat out there

33 Contents Context Europe v South Africa different starting positions, drivers & plans Looking back to plan for tomorrow food v non-food experiences (R)evolution caution or leap-frog for advantage? Amazon the game changer that cannot be ignored in the longer term Suggested Key Success Factors some must do s for success

34 Some suggested key success factors

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