Omni-Channel Retailing is a subject we are go to be hearing a lot about in the coming years. This is the first of two blogs on this topic.  In the first blog I will provide an oveview of what the term means and then outline the implications for shippers, retailers and consumers.  In the next blog I will outline the implications for freight transportation companies and logistics service providers.

It is helpful to define some terms to understand what is taking place.  The chart below and some of the content in this blog are taken from an article entitled Omni-Channel Supply Chains Designed for a Retail World without Boundaries by Randy Stang, Vice President of Customer Solutions for the Retail Industry team at UPS.  The chart captures the various retail models visually.

Over the past decade, retailers have been migrating from the basic Single Channel model of store to consumer retailing to the utilization of multiple modes (e.g. store and e commerce).  Multichannel retailing is the use of a variety of channels in a customer’s shopping experience.  Such channels include: retail stores, online stores, mobile stores, mobile app stores, telephone sales and any other method of transacting with a customer. Transacting includes browsing, buying, returning as well as pre and post-sale service.

As the name implies, Multichannel retailing involves serving customers through a discrete set of distribution options.   Pioneers of multichannel retailing include Macy's, Next PLC, John Lewis and Neiman Marcus. The pioneers of multichannel retail built their businesses from a customer centric perspective and served the customer via multiple channels before the term 'multichannel' was used.

Canada is going through some dramatic evolutions and revolutions in the world of retailing and in retail distribution.  The changes are very evident every time I visit or drive by my local shopping mall, the Yorkdale Shopping Centre in Toronto.

The mall has gone through another major expansion.  Microsoft and Apple have stores a few feet apart.  The number of American chains (e.g. Victoria’s Secret, William Sonoma) continues to expand.  Some high end chains (e.g. Holt Renfrew, Harry Rosen), that have been in the mall for decades, are in the process of major expansions.  The upstairs food court has been totally transformed and upgraded.  In addition to the old standbys, (e.g. Chinese, Thai, Greek food), one can now buy lobster grilled cheese sandwiches, high quality Indian food and a host of new treats at the mall. 

So what is going on out there?  There are a number of discernible trends taking place that will have a direct impact on freight transportation in Canada. 

Mergers and Acquisitions

Loblaw’s is in the process of buying Shopper’s Drug Mart, Sobey’s has bought Canada Safeway and Hudson’s Bay Company is buying Saks Fifth Avenue.  This will certainly lead to warehouse rationalization, the cross-selling of specific items (e.g. President’s Choice Products) in Shopper’s Drug Mart stores, carrier consolidation and a host of other transportation related changes.

If you haven’t been watching, you may be missing one of the most interesting and important battles in retailing and freight transportation - - - the clash to deliver shipments to consumers on the day they are ordered.  Here is how the battle is shaping up. 

At this point, the names of some of the key players are pretty familiar to most residents of North America.  Amazon, Wal-Mart, Google, Target, FedEx, Walgreen, eBay and Best Buy are moving forward with same-day delivery services in the United States.  In Canada, four major retail brands and Canada Post are launching a same-day delivery service for online orders in the Toronto area.  The Delivered Tonight e-commerce service is a pilot project with Best Buy, Future Shop, Indigo and Wal-Mart. 

For now, the strategy seems to be more about creating a customer expectation of same-day service than answering consumer demand. As Amazon has done before, it is working to create that demand with same-day shipping in 10 cities, while it also builds warehouses near major metro areas, paving the way for same-day delivery service on a much broader scale.  Currently, Amazon is able to reach 15% of the market in America’s top 20 metropolitan areas.  It is making a major to push to add warehouses close to these markets that would allow it to reach 50 percent of Americans.

Another feature of same-day delivery is convenience. The major retailers are testing various same-day delivery models.  Wal-Mart is offering in-store, same-day pickup for online orders.  Amazon is exploring the “pick-up” model as well with its new Amazon Lockers in convenience stores, grocery stores and drug stores in selected cities.  eBay is testing an “eBay now” mobile app, available in San Francisco and New York City, that relies on couriers for same-day delivery of products ordered online from existing partner stores.

The major business news story in Canada this past week was the planned acquisition of Shoppers Drug Mart by Loblaw Companies Limited for $12.4 billion.  Loblaw Companies Limited, a subsidiary of George Weston Limited, is Canada's largest food retailer and a leading provider of drugstore, general merchandise and financial products and services. Loblaw is one of the largest private sector employers in Canada with more than 1,000 corporate and franchised stores from coast to coast.

It supplies more than 5,000 private label products that provide customers with healthy, organic, environmentally friendly and high-value alternatives. Introduced in 2006, its Joe Fresh brand is now available in more than 300 Loblaw banner stores across the country. This line includes the Joe Fresh collection (apparel and accessories), Joe Fresh beauty products (cosmetics) and Joe Fresh bath products (a range of bath and body products). 

Shoppers Drug Mart Corporation is the licensor of full-service retail drug stores operating under the name Shoppers Drug Mart (Pharmaprix in Québec).  With 1,242 Shoppers Drug Mart and Pharmaprix stores operating in prime locations in each province and two territories, the Company is one of the most prominent retailers in Canada.  The Company also licenses or owns 57 medical clinic pharmacies operating under the name Shoppers Simply Pharmacy (Pharmaprix Simplement Santé in Québec) and six luxury beauty destinations operating as Murale.  As well, the Company owns and operates 62 Shoppers Home Health Care stores, making it the largest Canadian retailer of home health care products and services.  In addition to its retail store network, the Company owns Shoppers Drug Mart Specialty Health Network Inc., a provider of specialty drug distribution, pharmacy and comprehensive patient support services; and MediSystem Technologies Inc., a provider of pharmaceutical products and services to long-term care facilities.

On April 17, Food & Consumer Products of Canada (FCPC) held their annual Supply Chain Symposium.  It was an excellent event that attracted many of the top food and consumer products manufacturers in Canada.  I have attended a number of very good supply chain educational events over the years.  This one ranks up there with some of the best CSCMP annual conferences.

This was direct result of how Errol Cerit, Senior Director, Supply Chain & Industry Affairs and his team at FCPC delivered on their theme of “Thinking in New Boxes.”  The meeting began with a stimulating interactive session led by Alan Iny, Senior Global Specialist, The Boston Consulting Group.  Drawing from his upcoming book on this topic, Mr. Iny opened the day by identifying how we all call upon our paradigms, concepts and stereotypes to shape the boxes we use to classify the data that we receive.  This set the stage for the remainder of the day and for Mr. Iny’s closing session.

This was followed by a presentation from Peter McMahon, Chief Operating Officer of Loblaw Companies Limited.  Mr. McMahon highlighted how 14 million Canadians go through the company’s 1200 stores across Canada each week.  He shared with the audience some of the key market segments driving his business, some of the key forces affecting the retail food industry and then outlined the company’s supply chain transformation strategy to serve customers in the past, present and future.  It was very interesting story.

Mr. McMahon was followed by Professor Benoit Montreuil, Canada Research Chair in Enterprise Engineering at Laval University.  Mr. Montreuil spoke about creating a “Physical Internet,” a “paradigm breaking” way of creating a physical superhighway or infrastructure for freight transportation that would parallel the IT infrastructure developed for the Information Superhighway. 

Professor Montreuil presented a very effective case for the need to create a “Physical Internet.”  Logistics costs represent 5 to 15 percent of GDP.  Greenhouse gas emissions continue to rise.  The professor argued that sixty percent of the weight-volume for freight is comprised of air and packaging.  Twenty-five percent of freight travel is the movement of empty road equipment.