Freight Companies Reshape their Businesses

As Retailers Modify their “Footprints,” Freight Companies Must Reshape their Businesses

E-commerce purchases make up 5 percent of Sales in the United States and about 3.4 percent in Canada. These relatively small percentages may cause retailers and trucking companies to downplay the role that e-commerce is having and will have on this sector on this sector. This would be a huge mistake.

Dramatic changes are coming to almost all facets of the retail sector. In the home entertainment and book distribution segment, retailers are changing product lines and the customer buying process experience. A trip to the local Chapters or Indigo store will open your eyes to the types of transformations under way. As online music sales have escalated in recent years, CDs have been almost totally removed from store shelves and books constitute a much lower percentage of the floor space. In their place, you will find dolls, toys, gifts, glassware, e-readers and tablets, blankets and a host of other items. Since so many Dell computers and other high tech products have been purchased online for the past 20 years, consumers are very confident in buying products in this manner.

A visit to the local Loblaw’s store will highlight a much larger footprint and a greatly expanded product line. Take-out meals, sushi counters, organic and non-organic food counters, in-house restaurants and a host of other changes have greatly expanded the size of these giant stores. Staples, Toys “R” Us and Best Buy Co. Inc. are shrinking their store space, expanding stock rooms for e-commerce distribution or shutting certain outlets. Toys “R” Us is converting more store space to backrooms to fulfill its growing number of online purchases. Later this year it will begin allowing customers to pick up their online orders at its stores.

Meanwhile in the United States, Amazon is investing in distribution centres in the major markets so it can provide same day delivery to its customers. This will allow them to take direct aim at a range of retailers in these markets. As they increase their e-commerce business, they will continue to draw more business away from traditional retailers.

Retailers are scratching their heads as to the appropriate footprints for their stores, the correct assortment of products, the marketing approaches they should use for their brick and mortar operations and e-commerce operations and whether to shutter or add stores.

The key issues for retailers are:

• How do customers buy a particular product line (e.g. visit a bricks and mortar operation, take a test drive and then shop online)?

• What technology will the customer use to buy a product (e.g. digital screens in stores, use their own tablets)?

• How much inventory should be on shelves, in backrooms or in DCs? • How will the goods be delivered to the customer (e.g. local delivery, delivery from DC direct to customer, customer pickup from store or backroom)?

• If a retailer chooses to close stores in some locations, will consumers perceive the company to be going out of business?

The key issues for truckers are:

• How will the changes in store sizes, product mix and shipment sizes play out in each retail sector and for each retailer?

• What types of transportation services and drivers will be required to service each sector?

• Should the trucker try to provide a full range of transportation services or should they focus on those segments that best fit their business model (e.g. courier, cartage, LTL, truckload)?

• Will the traditional classifications of transportation services hold up in the future?

• As omni-channel retailing take hold, will third party logistics companies be the best ones to create and integrate the appropriate mix of transportation services for each retailer?

• What new types of transportation businesses will emerge, like the Uber taxi service for consumers, to meet certain assortments of evolving transportation needs?

It should be an amazing ride.