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What’s Next in E-Commerce

Dennis Yeo • 10/04/2019

The issue of foreign worker quotas was hotly debated at the recent budget debate in Singapore, casting the spotlight once again on the services and retail industry. What is noteworthy is that the caps to foreign workers will not be limited to F&B and the services sector. The transportation, storage and logistics sector, which is the engine that propels e-commerce, will not be exempt too. For retailers, e-commerce players and logistics firms – in fact the whole supply chain management – it is a delicate balance to automate to improve productivity whilst managing costs. It is worth examining what retailers and logistics players are stacked against and what is going for them in a labour-lean, digital-driven operating environment.

The millennial consumer is a very big factor in this operating environment.

The 20-something consumer is on the go. He is very comfortable multi–tasking, toggling job, leisure, shopping, working seamlessly in a single reality between work, live and play. The built environment encourages it. E-commerce feeds it. The whole electronic commerce eco system enables him to shop, eat, ride, learn, work and play online, 24/7, instantly on-the-go.

Supply chain disrupted

The impact of e-commerce on supply chain logistics is well documented. From production, packaging to storage, distribution, collection – the entire life cycle around the manufacture of goods and products has disrupted. The traditional model of manufacturing goods at a factory, packaging and distributing them is being challenged. Consumers want to buy at source, sometimes in bulk to reap savings, and wants products delivered to his home as soon as possible.

Witness the success of delivery box solutions providers such as parcel locker start-ups Parcel Santa. Speed is the driving force behind Parcel Santa, a smart-locker based concierge service for a hundred condominiums in Singapore. Shoppers who choose Parcel Santa to deliver their products are informed by SMS when their parcels are delivered to the lockers. Parcel Santa gives recipients up to 24 hours to collect their parcels with a One Time Password, with an option to reschedule the delivery to other locker locations or extend the collection period at a fee. Sensors are installed to identify recipients and authorise access to collect the parcels. Parcel Santa’s promise of a swift delivery is a differentiator. Items ordered before 10pm will be delivered by 7.30am the next day.

Last mile logistics – or the process around quick deliveries of goods – will take on a higher degree of sophistication with the advent of autonomous vehicle technology. Unmanned delivery trucks open up possibilities to schedule deliveries in the wee hours of the morning with no constraints on labour and no added stress to peak hour congestion. This will dramatically impact the trucking industry as driverless vehicles are able to carry freight 24/7 with reduced labour involvement.

But Singapore’s small land size puts a lid on maximising the efficiencies of last mile logistics. Developing countries in the region including Indonesia, Malaysia and Vietnam will see more success. Populations in these markets are spread over large land areas and autonomous vehicle technology will be felt more keenly. Singapore’s population is housed in compact residential areas around the island, mitigating the benefits of unmanned vehicles.

Reverse Logistics

To complete the customer experience, e-commerce retailers have begun to look into the area of fuss-free returns, and that will add to the level of sophistication in supply chain logistics. Retailers are motivated to provide seamless returns especially if it translates to shoppers over ordering more than they need, lured by the prospect of being able to keep the ones they want and return the balance.

In reality, there is in fact a cost to providing seamless returns. Unpacking, inspecting returned products, logging, making disposition decisions, forwarding products for further handling all means higher labour costs and an increased investment on job training. The goal is to process returns as quickly and economically as possible, whether that means dispatching the goods to store shelves or a distribution centre for future sale, selling in bulk to a discounter or jobber or trashing damaged goods if necessary. In fact some retailers provide a full refund and tell customers to keep items that are too cumbersome and costly to return, like furniture.

Most supply chains are built around the need to push goods in one direction. Never has there been such a mandate for equally robust and efficient reverse logistics processes and warehouse space in which to execute them. Just imagine the journey that a pair of sneakers that do not fit has to take after the consumer puts on that return label and drops it in the mail. Each time those shoes are touched through the process on the way to the next customer, the retailer’s margin gets slightly smaller. In this regard, there is tremendous potential in automating systems, reskilling and retraining talent.

A maturing entrepreneur eco system

Technology aside, there is a place for creating a healthy start-up eco system that supports testing new business models and innovative businesses without the overhang of high overheads. A large chunk of these costs are rentals and manpower. A start up entrepreneur should be able to focus on honing their craft, whether it is food or fashion or athleisure products – experimenting, testing concepts without being plagued by worries of paying monthly rentals and staff costs.

Pop-ups, kiosks, test kitchens are a low-cost solution to help local start–ups experiment while keeping overheads manageable. The business case is for it is very compelling. Start-ups appreciate the flexibility in not having to commit to a long lease, using test kitchens to pilot their concept and vacate when it is time to go back to the drawing board, take stock and decide on next steps in taking their business forward, whether to take on a bigger or smaller space in a more permanent location or continue to rent the space with other like-minded entrepreneurs in related trades to reap synergies in sharing resources.

This is probably why the market welcomed homegrown start up honestbee’s success in getting its approval from JTC to allocate part of the industrial space it leases from the industrial landlord to operate a large scale automated grocery and dining concept spanning 60,000 square feet of space at an industrial building at Boon Leat Terrace.

This tech-enabled concept, called habitat – comprises food and beverage concepts as well as a supermarket with an automated cashless checkout system and a robotic collection point.

While the authorities say approvals for using industrial spaces for ancillary use is granted on a case by case basis, this is a step in the right direction of fostering innovation and entrepeneurship. If start ups enjoy flexibility on the length of their leases unbounded by the traditional lock-in leasehold tenure, that would be a big step in helping e-commerce retailers and the start up community to thrive.

What’s Next

The traditional model of manufacturing products en masse on a large scale has been further disrupted because the millennial consumer also wants flexibility and wants to stand out from the crowd. He wants to be able to differentiate himself from the other consumers, harbours a preference for customised, personalised products, a mix and match of different components that make up a product, whether it’s in fashion, jewellery, food and beverage options, or automobiles. In the near future, this flexibility and customisation will extend to bespoke drugs and medications and nutritional supplements. That presents tremendous opportunities for disrupting the manufacturing life cycle further and is the genesis of industry 4.0.

The above article originally appeared on The Business Times on 5 April 2019.

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