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Micro-Fulfillment – ​​Crises rarely come alone

Konrad Wolfenstein

Most of the time, major crises don't just come out of the blue. There are harbingers, ominous developments and missed opportunities to give in in time. It is usually due to the complexity of the context that the inevitable happens: the economic crisis or when another bubble bursts. The Western world has been spared from major accidents and catastrophes since World War II. Brexit itself was considered manageable without the EU falling into major difficulties.

Micro-Fulfillment – ​​Crises rarely come alone – Image: Victor Runov|Shutterstock.com

corona crisis

This changed suddenly with the corona pandemic. Existing problems and bottlenecks were particularly noticeable in logistics. Supply chains were interrupted and supplies to the population could only be maintained with emergency logistical solutions. For shipping logistics, 2020 was almost a year-round volume of work like usual at Christmas.

It's slowly becoming clear to everyone that the current situation is not a temporary one. That the changes that have already taken place will be permanent and will become the standard.

But for some people there still seems to be a desperate hope that this is just a storm that will pass and then everything will continue as before. Anyone who thinks like that is wrong and is losing valuable time compared to the competition.

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Above all, the big ones, especially Amazon, are the big winners and beneficiaries of this crisis. E-commerce medium-sized businesses are becoming more and more dependent on digital platforms. Many people now generate their leads almost exclusively via such digital platforms and the major social media channels, instead of relying on multiple digital sales channels. SEO has long been neglected. There is increased investment in automating lead processing instead of expanding performance marketing. New accents are no longer set or even sought. Your own digital microcosm is lost. It's bad enough to see that established industries are competing with each other all year round with 20-30% discount campaigns in order to attract new and existing customers.

Marketing crisis

Budgets are increasingly moving towards paid ads on Google & Co. Anyone who is honest knows that a ROAS (return on advertising spending) of 600% in the area of ​​social media is a utopia for many. If agencies celebrate a ROAS of 150% as a success, then it is window dressing.

If I achieve sales of 7,500 euros with an advertising investment of 5,000 euros (150% ROAS), then the costs of the ads advertising agency are not included in this, nor are my own other costs such as wages, rent, purchasing, etc. myself a ROAS of 300% is unsatisfactory. Everything about it is hard to find. Ultimately, the big winners from “our” advertising campaigns and contact initiation are the social media giants Facebook & Co.

It is also shocking to see that many are increasing their marketing via social media and directing their customers there. What this means is that you share your customers with Facebook & Co. and thus expose them to the competition. Many people are unaware of this mistake and do funnel marketing the wrong way round. Many people forget that it is precisely this data, the customer data and their contacts, their behavior and interactions, that is the capital that the social media global players know how to use optimally for themselves: with advertising, including advertising from our competitors.

Fulfillment crisis at Amazon

Individual orders and deliveries are costly, time-consuming and hardly profitable if you are not specialized in it. Therefore, many outsource their e-commerce business and use fulfillment service providers. But not all fulfillment is the same. Large, well-known fulfillment service companies such as Amazon, Arvato, DHL, Fiege, Hermes, XPO Logistics or Kühne + Nagel differ in their areas of focus.

Amazon e.g. B. provides a sales channel with its digital platform of the same name. Amazon is particularly generous when it comes to returns management, especially at the expense of its partners. The partner and dealer are generally held responsible for shipping errors.

It can also happen that Amazon unilaterally and independently extends the payment conditions, blocks certain items and payments that have already been received and removes them from the offer. As a rule, the goods can (does not have to) be activated again in the offer on the Amazon platform via a complex procedure.

Everyone needs to be clear about what they are getting into and to what extent they are becoming dependent on fulfillment services.

With Amazon you also have to be aware of which neighborhood you are in. Chinese online retailers are becoming increasingly dominant on Amazon. The number of Chinese retailers is also increasing significantly on the German Amazon marketplace. According to a recent analysis by the US company Marketplace Pulse, Chinese online retailers are in the majority on Amazon.com for the first time. Of the 10,000 top sellers on Amazon, 49 percent are based in China and only 47 percent are based in the USA.

In Germany, too, the number of China retailers on Amazon has increased by 10 percent. Current share: 38%. Last year it was 28%. However, among the top 100,000, the Chinese with 41% have already overtaken the German providers with 33%. In France the proportion among the 10,000 top sellers is 55%, in Italy it is 53% and in Spain it is 58%. Ascending trend.

A problem is not only that not all Chinese products comply with European or German regulations, but it is also not clear to what extent the applicable tax is paid correctly.

Amazon is weakening. This background, but not alone, also explains why Amazon has apparently decreased in delivery reliability and customer service. The corona pandemic has certainly contributed significantly to this and Amazon is doing everything it can to combat it, including with a new micro-fulfillment project.

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Fulfillment issues

Even before the corona pandemic, a new development was noticeable. Thanks to technological progress and the growing demands on e-commerce from its “impatient” customers, the same-day delivery concept has become more and more important. Likewise the feasibility. Same-day delivery is a form of courier express parcel service that delivers packages more quickly, ideally within a calendar day or within a scheduled time slot. Although same-day delivery in Western Europe is forecast to reach a volume of three billion euros by 2020, it is currently only expected to be a niche market due to higher costs and customers' thriftiness. However, the corona pandemic will change and accelerate this permanently.

For example, the corona pandemic has... B. “forced” the decisive step forward with video conferences. A rethink is taking place in companies. The longer business trips, especially in internal international areas, are replaced and learned by video meetings, the more the need for long-distance flights will decrease.

Home office is also a good example. What was hardly possible before suddenly became self-evident and you ask yourself, why did it take so long? Of course, not everything that glitters is gold, but it does expand and facilitate the possibilities for making the working world flexible.

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The closed stores during the pandemic in particular quickly showed where the major weak points of our e-commerce lie. While many everyday things can be ordered online, they are still far from being available for “fast” shipping. Several days are not uncommon. A local pick-up service is also largely rudimentary. Whether drive-in, click & collect or vending machines, everything had to be built in a very short time. That didn't always work. A shoe dealer in my area had sold a few shoes to a customer in the neighborhood without permission at his front door. He was seen doing this and reported to the police. A fine will follow. In any case, it will not have been financially worth it, even if one can assume that the focus here was on quick help.

With the previous fulfillment solutions, you can:

  1. a) Small orders and
  2. b) fast deliveries (same day delivery)

cannot be achieved optimally in a cost-reduced manner.

Micro-fulfillment is the next necessary step, especially in the food sector, where the perishable nature of the goods requires fast delivery.

Micro fulfillment

Daifuku, the world market leader in intralogistics, has already successfully implemented such a system:

In general, Japan is already a few steps ahead of us here. More about it here:

The basic requirement for this is an automated storage system. In micro-fulfillment warehouses, pickers and customers don’t get in each other’s way. The automated pickers (robots) are in use around the clock, all year round.

The human factor is important

Because micro-fulfillment is very cost-intensive, this must be offset by automation, automation processes and robotics. An autonomous warehouse alone will not work. Advice and services are crucial for acceptance and success.

It's not just about reducing contact between sales staff and customers just because of the corona pandemic.

It's about the absolute freedom to decide whether the goods can be ordered on site, mobile or at home. Whether and where the goods can be delivered or, if desired, picked up and even continued as a purchase on site.

Flexibility in options is an essential feature of today's economic thinking.

It is not progress if we transform customer-serviced stores into autonomous sales hubs, where there is no longer any room for interpersonal questions and advice, complaints and many other services such as mailing and parcel delivery and therefore represents a blatant step backwards.

Conditions for micro-fulfillment from the customer's perspective

Home shopping

Mobile shopping

Hub Shopping

Payment systems

particularities

Daifuku's Business Development is a very good starting point for competent exchange and advice. Market leaders, many years of experience and personal contact are important factors for the Daifuku team to understand the concerns and problems of its customers and to offer solutions.

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