Store-based fulfillment of customer orders got an enormous boost during the COVID pandemic, when both curbside pickup and delivery offerings became survival tactics for so many retailers. While more than half (54%) of retailers responding to the 2023 Omnichannel and Fulfillment Benchmark Report said active physical stores are the final locations for inventory prior to delivery, retailers are increasingly using third-party services to handle the actual mechanics of picking, packing and delivering items to consumers.
While nearly two-thirds (65%) of retailers responding to the 2022 survey had assigned in-store staff to these tasks, that percentage dropped to 56% in 2023. Another indication of this change is that the number of retailers providing dedicated space for order prep also dipped between 2022 and 2023, from 60% down to 43%.
Get all the survey results and analysis in the 2023 Omnichannel and Fulfillment Benchmark Report, Retailers’ Toolkits Now Include Media Networks and Marketplaces
Additionally, the percentage of retailers using third-party services such as Instacart, DoorDash and Uber Eats climbed from 45% in 2022 to 53% in 2023. Each of these companies announced new retail partnerships last year, many outside the “home turf” of the grocery vertical. To name just a few:
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- Camping World partnered with Instacart for same-day delivery of 1,800 products via the service’s Big & Bulky fulfillment solution;
- Staples, Petco and Spirit Halloween began working with DoorDash to offer same-day delivery; and
- PetSmart and discount home retailer Big Lots inaugurated delivery deals with Uber Eats.
Finding Partners to Tackle Fulfillment Complexities
These developments are part of a larger trend of outsourcing fulfillment’s last mile, traditionally the most expensive leg of the product’s journey, to partners that specialize in mastering its complexities. These include courier services such as FedEx and the USPS as well as third-party delivery partners like Instacart. While just 45% of 2022 survey respondents outsourced deliveries to courier services, 57% did so in 2023. The percentage using third-party companies also rose, from 29% to 38%.
While more retailers are handing off these tasks to other companies, presumably as a way to cut costs (rising shipping costs were identified as the top challenge among retailers, at 56%), nearly as many (55%, up from 38% in 2022) worry about customer expectations around delivery times. As Amazon has stepped up its delivery game, for example sending package recipients photos of boxes on their doorstep as proof of delivery, other retailers have been forced to find ways to make — and keep — delivery time guarantees.
Marketplaces Valued for Both Strategic and Tactical Benefits
The growth of marketplaces has been one of the top retail stories of the past few years, and that’s reflected in the 2023 survey results: 28% of retailers called marketplaces effective tools for achieving their omnichannel brand strategy, double the 14% that chose this option last year. And the percentage of respondents that don’t sell on or operate marketplaces shrank this year, from 16% in 2022 to 9% in 2023.
Marketplaces are still seen primarily as customer acquisition vehicles, with the largest group of retailers (71%) saying access to a wider customer base was a key benefit of marketplace selling. However, they are now being prized for their practical capabilities as well: 38% cited faster, more cost-effective shipping, up from 21% in 2022. Marketplaces also are increasingly seen as data-gathering tools, although growth in this area has been slow, rising from 28% in 2022 to 31% in 2023.
The ROI Impact of Omnichannel
The benefits that retailers reap from omnichannel operations increasingly include both high-level strategic pluses and practical positives. On the strategic side, 41% of retailers identified reacting more quickly to business and market changes as an important omnichannel objective, followed closely by the 40% that cited providing a seamless customer experience across all channels.
But the 2023 survey showed that for approximately three in 10 respondents, omnichannel strategies also are being designed to create practical, bottom-line benefits: 31% of retailers cited improving customer retention as a key omnichannel objective, and 29% identified both reducing returns and making fulfillment services more cost-effective.
Benefits stemming from omnichannel strategies also have been spreading widely across the retail enterprise. For example, in 2022, 21% of respondents said improved supply chain efficiency was a valuable benefit, but that percentage increased to 34% in 2023. Omnichannel strategies also are addressing the country’s tight labor market: while just 8% of 2022 respondents said improved employee satisfaction/retention was a key benefit, that number nearly doubled in 2023 to 14%.
Want to find out more about how retailers are meeting omnichannel and fulfillment challenges? Check out Retailers’ Toolkits Now Include Media Networks and Marketplaces
