Urban fulfilment: the battle for city shoppers

More than half the world’s population lives in cities. Urbanization is a global megatrend that presents retailers and omnichannel retailers with special challenges. “Urban fulfilment”, in other words delivering the product to the customer, must be profitable and efficient. Easier said than done.

The city’s severely congested environment makes it difficult to fulfil low-volume, high-frequency omnichannel orders quickly. Rising property prices make the prospect of operating efficient urban fulfilment centers that provide easy access to a wide range of stock economically unappealing. A lack of parking spaces and restrictions to driving in the city center cause additional problems as well.

Challenges in urban fulfilment

Delivery within two days is now standard in online trading. However, customers have increased the pressure on retail, and want to receive their omnichannel orders the next day, or even on the very same day. This means retailers must develop networks that enable them to deliver products highly efficiently and with great urgency to urban customers.

If the retailer is responsible for last mile delivery itself, he faces major challenges. Customers might well want delivery within the same time slot, and traffic congestion could prevent timely deliveries. In an urban environment, large orders or particularly bulky orders requiring an appropriate delivery vehicle are problematic. This is because parking spaces are in very high demand.

Another challenge retailers face is stock availability. The increased demand from customers for quick delivery means that stock availability is key to a retailer’s success. Urban omnichannel fulfilment faces capacity problems, given that storage in cities is very limited. To ensure a large product range is available, retailers have to fulfil orders from distribution centers outside the city limits. However, this is at the expense of the delivery time.

Store-based fulfilment

One solution could be branch-based delivery – the main challenge here being stock management. Retailers rely on a single stockpile to meet both high-street and online shopping demand. This means retailers have to carry out more complex demand planning.

Other possible solutions could be:

• Dark store fulfilment: dark stores are shops that do not get any customers. They fulfil e-commerce orders and restock local branches in an emergency.
• Pop-up fulfilment centers are a short-term approach to urban fulfilment. These are run on a temporary basis, and are generally located in empty sales areas or unused warehouses, and they help tackle peak demand periods.

To make omnichannel urban fulfilment work, retailers need the right combination of resources and processes. One of the key factors that will determine a retailer’s success is whether they can create fulfilment capacity and set up sites that are perfectly adapted to their order profiles, infrastructure capacity and demand patterns.

To achieve this, retailers first have to consider product characteristics, typical order sizes and service requirements. The next things they need to consider are capacity, current activities and the location of current and potential future facilities. Before deciding on a concept, they should also consider the volume they expect to receive as well as the distribution of e-commerce orders. Various cost-related aspects also play a major role here.