Khaled Naim | ONFLEET
AS WE ROLL into 2021, now is the perfect time for 3PL companies who manage deliveries to think ahead. From Onfleet’s position partnering with leading retailers, big and small, here’s what our experts expect in the coming year:
1 Behavior changes are here to stay
It’s now clear that COVID-19—a defining factor of 2020—will follow the economy into the new year. Consumer habits are sticky. Even post-vaccine, the pandemic’s influence on buying behavior willlargely remain. While customers are craving a return to normalcy, the coronavirus accelerated an already-rising digital economy. These changes are marketwide, not merely temporary. In 2021, expect more demand for delivery, more businesses getting into delivery, and a greater need for retailers to stand out.
2 Pop-up fulfillment centers will help expand warehouse footprints for more coverage
Temporary storefronts called “pop-up shops” have evolved into a retail trend, seen in holiday urban shopping centers and environments that depend on seasonality, such as ski or beach resorts. Now, this trend is coming to warehouses, led in part by Walmart. In response to a holiday increase in e-commerce traffic, Walmart is adding pop-up fulfillment centers to maintain high service levels for its fast deliveries. As the The Wall Street Journal reported, Walmart is creating these pop-up fulfillment centers by partitioning off parts of its distribution centers that usually handle palletized goods.
3 Warehouses will innovate to respond to online growth
Consulting firm Deloitte forecasts that e-commerce sales will grow by 35% during the 2020 holiday season, approaching the $200 billion mark in sales. Walmart’s e-commerce sales increased by 79% in the third quarter of this year, while rival retailer Target had an increase of 154% in online sales for the same quarter. This growth trend was underway before 2020, but the pandemic gave it a massive boost. In response, retailers have created various facilities to store products, fill orders, and dispatch them. Warehouses, in response, will continue to develop dark stores, distribution centers that look more like retail stores for pick and pack, and even tiny warehouse spaces within retail stores to help with fulfillment in 2021.
4 Deal flow will increase with a return to travel and in-person meetings
Given the structure of 3PLs, warehouse, and distribution center layouts, most decision-makers prefer to see them in-person when surveying locations for acquisitions, expansions and sales. Therefore, we predict 2021 will see an increase in mid-market mergers and acquisitions in the 3PL segment, providing people can get out and meet one another to get them done.
CONSUMER HABITS ARE STICKY. EVEN POST-VACCINE, THE PANDEMIC’S INFLUENCE ON BUYING BEHAVIOR WILL LARGELY REMAIN.
5 Delivery volume will skyrocket
In 2020, e-commerce delivery volumes boomed. Customers wanted to stay safe during the pandemic while still eating, drinking, and mimicking their favorite social activities. Food businesses are a perfect example of how these habits are here to stay.
In 2021, customers will order more delivery than ever before. Now that customers are comfortable with delivery, expect them to increase their frequency across industries. Once someone’s already ordering food twice a week, it’s only a small psychological shift to start ordering three times. And once customers are familiar with ordering delivery in general, expect them to start ordering in new areas too. In food delivery, this will lead to businesses optimized for delivery, like combo kitchens or non-traditional preparation spaces. Retailers will adjust in other areas, too, leaning toward low-rent options such as micro fulfillment centers that emphasize deliverability over storefront.
6 The beginnings of delivery automation
In delivery, like in many areas, economic conditions favor automation. As the demand for delivery accelerates, the value of delivery automation increases too. In 2021, expect to see small movements toward delivery automation, such as increased funding for drones and autonomous vehicle companies. That said, these shifts are likely to be small. The opportunities are exciting, but the challenges are large. Government regulation, for instance, is only nascent, and car insurance companies are still unsure how to cover self-driving cars.
Delivery is still in the early stages of this paradigm shift. Amazon, for instance, recently laid off a large portion of its Prime Air drone delivery team, implying less enthusiasm for investing in this area for the time being. On the other hand, autonomous delivery companies Gatik and Nuro recently raised $25 million and $500 million, respectively—the sort of money that will accelerate industry innovation in the coming years.
Next year, be on the lookout for interesting developments in autonomous vehicles (like more Waymo rides and promising delivery news from Tesla), but we’ll have to wait a bit longer before automation takes delivery by storm.
7 Innovative delivery models will rise
Subscriptions instill loyalty in customers, increasing the likelihood they purchase again. These models both increase efficiency and create reliable revenue. Since a small percentage of customers typically drive a large percentage of sales, the successful businesses in 2021 will create new business models that increasingly revolve around delivery subscriptions.
Successful retailers will realize that delivery isn’t merely a choice between on-demand, subscription, or scheduled; instead, your optimal offering depends on your customer and product. If you find the combination that works for you, you’ll create happy—and profitable—customer habits.
Khaled Naim is CEO and Co-founder of Onfleet, a San Francisco, Californiabased final-mile solutions provider. He can be reached at [email protected].
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