How Microfulfillment Could Help Smaller Retailers Compete With Same-Day Delivery Guarantees

The e-commerce boom has established a new baseline of consumer retail expectations, in terms of convenience and efficiency. The fast shipping guarantees of companies like Amazon and Walmart have set a precedent for the rest of the industry, but not everyone can easily keep up. For many smaller retailers, they’re turning to a new solution in order to ship product fast: microfulfillment.

“For on-demand fulfillment, from an economic perspective the traditional supply chains just don’t work,” said  Steve Hornyak, CCO of Fabric. “They’re too large, they’re too distributed and it costs too much, if you’re going to try to get product to people quickly. They’re really designed for batch, multiday fulfillment. That’s why you’ve got to get closer to your customers in order to be able to do same day and you’ve got to shrink them down.”

Many brands have been experimenting with new ways of shipping product to their customers, particularly as brick-and-mortar became restricted and e-commerce grew during the pandemic. Operating brand-owned “dark stores” as fulfillment centers for the local area is an example of microfullfilment – but one that requires an existing brick-and-mortar presence.

For those businesses without a physical footprint, or with significant underserved customer hubs, fast shipping is harder to achieve. Centralized warehouses must service all locales and must frequently rely on already overburdened logistics networks. Some companies have therefore opened new warehouse locations to reduce delivery times. Others have chosen to partner with third-party logistics providers (3PLs) for their microfulfillment needs, such as logistics solution Fabric.

“We’re providing an on-demand, same day – if not multi-hour – fulfilment for our customers and allowing them to not only be close to their customers, but keep those customers close to them so that they can manage that interaction,” said Hornyak. “This is critical to moving forward, versus using an intermediary like an Amazon to manage that relationship.”

As consumers come to expect fast delivery, retailers are considering new fulfillment solutions.

By working with a 3PL for microfulfillment, retailers can alleviate the overhead costs of additional warehousing and pay only for the storage space they’re using; this amount can be easily adjusted, according to demand. They can also tap into various geographical markets as needed, without the risk of committing to a new lease.

Retailers who handle a lot of product, and a lot of SKUs within those products, can also benefit from being able to automate fulfillment at scale. The more complex the merchandise selection, the more time and resources are freed up by delegating that operation to a third-party. Companies that know certain product does well in a particular region can also stock their microfulfillment centers accordingly, to maximize inventory efficiency.

“[Operating dark stores] will persist to some extent; picking in stores will persist to some extent,” said Hornyak. “But part of the issue is that it doesn’t scale, number one. And number two, the stores are an expensive per-square-foot footprint in order to be doing warehouse fulfillment. Where you have high velocity and high order density areas, ultimately it breaks the retail experience and it breaks your supply chain.”

Retailers who partner with Fabric can either introduce the company’s automation software to their existing physical footprint, to make in-house fulfilment more efficient, or access Fabric’s network of microfulfillment centers. Fabric analyzes sales data in order to identify the most effective way to distribute product; integrates with e-commerce websites to provide up-to-date shipping estimates; and fulfills the orders using its own robotics and software.

As customers demand increasingly fast delivery, retailers must explore their shipping options in order to stay competitive. For DTC stores in particular, partnering with a 3PL to achieve that same-day delivery guarantee might be the most strategic option.

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