Amazon making moves, DHL electrifies, and hunger hinges on the last-mile
Amazon hits the High Street
Amazon’s doing a bit of Christmas shopping this week with news that it may be trying to acquire Morrisons, Britain’s fourth largest supermarket chain.
The acquisition is far from certain, with plenty of doubters who think the reports are ‘wild speculation’. But there are few who called Amazon’s acquisition of Whole Foods likely either, and many of those who don’t see the logic in this proposed move don’t fully understand Amazon’s last-mile strategy.
“If true, it would be the biggest of deals to sweep through the retail market, one to send a shudder through rivals,” said Louisa Clarence-Smith, The Times.
As reported before in this newsletter, physical stores are a central plank in Amazon’s plan to bring their operations closer and closer to the end-customer. Barely a week goes by without news of more Amazon locations opening, and their portfolio now stretches to a range of retail propositions – Amazon Fresh, Amazon Go, Amazon 4-Star, and Whole Foods. Each of them serves as a key link in their supply chain, allowing them to hold inventory close to urban populations, leverage the presence of Lockers, and ultimately get goods into the hands of customers faster and more seamlessly. So whilst this particular piece of news may turn out to be a bit of a red herring, there’s rarely smoke without fire and our view is that this may just be a sign of things to come.
They tore down parking lots, put up a fulfilment centre
In what seems like something of a bellwether for how cities and last mile infrastructure is changing, news has come from Chicago that the largest parking lot in the city is being redeveloped into last-mile fulfilment centres.
Real-estate firm JLL is taking the almost 4 million square ft lot under the city’s Millenium Park into logistics facilities for retailers, many of who will likely be based in the ‘Magnificent Mile’ shopping district a few blocks away. The garage was designed to allow truck and similar large vehicles, so it’s possible that the facility will be used to replenish stock for the nearby stores as well as act as a base for forward-deployed inventory, ready to be shipped quickly to consumers.
“If you’re no longer going to walk to a store, there needs to be a place for that inventory that’s local,” said Lee Hnetinka, Darkstore Founder and CEO.
Chicago isn’t alone. In New York, some businesses are using recently demolished building sites – where construction has yet to begin – to stage vehicles for deliveries. In three metropolitan areas, Amazon is using tents on vacant pieces of land as delivery stations, likely a tactic to deal with the spike in holiday volume. And startups like Darkstore continue to expand – its anonymous warehouse on 36th Street in Manhattan now fulfils Nike orders to sneaker-crazed New Yorkers.
Our sense is that this is the first in a series of changes we’ll be seeing in cities around the world. Pulling down parking lots in favour of logistics centres is a sign of the times, and the times are a changing.
DHL’s electric future?
This one has slipped under the radar a bit – DHL has an electric scooter subsidiary called StreetScooter, and it’s doing rather well. Originally started to build electric vehicles for the DHL fleet, it’s now emerging as an EV maker in its own right.
The company is set to double its production capacity to up to 20,000 electric vans a year with the opening of a new factory, and they recently started selling to businesses beyond DHL (namely British milk truck company Milk and More, where electric milk floats really never went out of style).
DHL is not alone in the space – UPS’ eBike program, active in Portland, Oregon and Pittsburgh, is an electric take on micro-mobility in the last-mile space. And readers of this newsletter may remember the last edition carried news of Royal Mail’s move into electric. But DHL seems to have found particular success with their own-brand efforts; one wonders if, like Amazon Web Services, this business unit could prove an unexpected (and money-making) hit.
In this short TED talk, Esther Ndichu, Humanitarian Supply Chain Director at UPS, argues that the challenges are less about food and more about logistics – that solving the last mile can help solve hunger. A bold claim, but an inspiring talk – well worth a watch, especially at this time of year.
PS: The Last Mile will be taking a Christmas Break just like everyone else, so we’ll see back on 11th January 2019. Thanks for reading and see you next year!
Argos is speeding things up
This week, Argos announced a £2.5m investment in a 69,000sq ft distribution centre (DC) in Croydon – the piece de resistance following a series of moves to improve their fulfilment, including the opening of 100 new online order collection points and 14 new stores within stores in Sainsbury’s Locals and supermarkets across London.
These moves are all part of the retailer’s larger strategy to improve its customer experience by speeding up its online sales and deliveries. The DC in Croydon alone is set to give 3.4m people quicker access 15,000 more of its products through same-day fast track deliveries and same or next-day click & collect orders.
“The new battleground is speed and convenience and getting customers what they want, when they want it” – John Rogers, Argos CEO
Need we say more? We’ve spoken before in this newsletter about how retailers are moving DCs closer and closer to cities to ensure a better delivery experience, and Argos – a relative innovator on the high street – is moving on this in a big way. First of many, we suspect.
IKEA is moving to the city
Argos isn’t the only retailer that got the memo on making sure its products are accessible to the ever-growing urban population. This week, IKEA announced that it’s sick of the suburban life and needs a pied-a-terre in the city.
With that in mind, the Swedish retailer will be opening 30 new small format stores in city centres over the next two years, refocusing efforts on e-commerce and delivery – the first of which will be in Paris, London, New York City, and Riyadh. They will be changing the layouts of the stores, making in-store shopping more inspiring and experiential.
Their main focus, however, will be on delivery. Following their acquisition of Task Rabbit last year, the company said it’s planning to invest more in delivery and assembly services so as to make the whole experience more convenient to its urban customers. Overall, it seems like these are changes designed not just to change the stores, but to change the way that customers think about IKEA. We all know that in today’s retail world, convenience is key and while for decades Ikea was always the cheap and cheerful choice, it needs to evolve to keep its customers coming.
“We see of course that the world around us is changing, and we want to be part of that,” Tolga Oncu, IKEA Head of Retail.
Restaurant delivery wars
London is proving to be one of the most interesting battlegrounds in last-mile restaurant deliveries. With massive players like Deliveroo, Uber Eats, and Just Eat on the frontlines, it’s no surprise that some players will have to throw in the towel.
And this week, the latest victim is Amazon Restaurants. The company announced the closure of the service in a rather curt and laconic statement:
“We are closing Amazon Restaurants UK. We would like to thank all our customers and merchants, and delivery partners for their support” – Amazon spokesperson
The secret is apparently in the sauce – to be successful in this industry it seems, you have to be more than just a logistics provider delivering food, but rather a food provider delivering logistics. Something Deliveroo (who is rumoured to be preparing for a new funding round to set a valuation floor for a formal takeover bid from rival technology firm Uber) knows all too well.
Is ‘New Retail’ the new retail?
Alibaba’s Jack Ma, who coined the term himself, thinks so. To Ma, ‘New Retail’ describes the increasingly blurred boundary between offline and online commerce as retailers focus on fulfilling the personalised needs of each customer.
In ‘New Retail’, customers should be able to shop online, have their items delivered the same-day and return the item in-store. Or they should be able to shop in-store with the help of VR technology in fitting rooms, skip the queue and purchase the items via a mobile app, and have their items delivered to their doorsteps when they get home. The online/offline variations are endless but one constant remains; variety and convenience for every customer.
In order for ‘New Retail’ to work, retailers must upgrade their business models to create a seamless convergence of offline and online. A great example of this is Freshippo (formerly Hema, previously covered in this newsletter), Alibaba’s supercharged supermarket in China.
“[Freshippo] is an experience centre, consumption centre, plus logistics centre rolled into one” – Hou Yi, Freshippo CEO
‘New Retail’ is probably getting a bit old by now if you count how much, and for how long, people have been talking about it. But Alibaba is that rare beast in the world of retail actually walking the talk, bringing experience and fulfilment together under one roof – so we can forgive Jack Ma the slightly hackneyed terminology.
With the rise of online retail, expectations about delivery speed have changed. But at what cost? This week, we bring you chilling stories of people who have suffered while doing honest work to help pick and pack our online shopping orders. Please use discretion when listening but listening is important.