It was all change in 2016. From futuristic innovations to unprecedented political shocks, it seems like uncertainty is the only certainty we have. But as we move into 2017 it’s time to look to the future and see what the year could have in store for us. What could these conditions mean for the supply chain world? We’ve come up with a few ideas:
Ecommerce the new convenience
57% of shoppers say convenience is the most important reason for shopping online (IGD ShopperVista research). Our research forecasts online to increase in value from £10.5bn in 2016 to £17.6bn by April 2021 with a compound annual growth rate (CAGR) of 11%. In 2021 we expect online to take 9.0% share of UK grocery, up from 5.8% today. But what does this really mean?
Fundamentally, in order to succeed, companies need to become more agile and customer focussed than ever before. Retailers will have to find ways of making ecommerce more profitable, whilst developing and improving the offer for customers to remain competitive and online shopping to remain convenient. Technological developments coupled with growing shopper expectations will create new opportunities for the industry. My colleague, Chris, recently wrote about how online could be your business’ path to profitability.
More innovation in logistics
Logistics remains one of the biggest areas for change and innovation within our industry, and the bar is being raised all the time. All this comes at a cost, and it’s no wonder the Wall Street Journal found that last year, Amazon’s outbound shipping expenses cost 10% of its revenue – that’s up from 6% in 2010. We heard that Amazon’s been testing an in-house delivery service on the west coast of the USA in order to cut costs, which will have a huge impact on its long-term logistics partners.
Last year, I wrote about recent drone innovations and what that could mean for the industry. Well, it’s no real surprise that last mile delivery remains one of the most exciting areas for innovation.
Mercedes-Benz, for example, has pledged to invest €500m over the next five years in designing vans that will support drone deliveries, and recently unveiled its Vision Van, which blends traditional last-mile delivery with more advanced drone technology:
Some of my favourite innovations from last year were last-mile innovations and I don’t foresee this changing in 2017 – watch this space!
The effects of Brexit
We’ve already seen the initial impacts of the UK’s EU referendum on the economy – and that’s before Article 50 has been triggered. According to UK Prime Minister Theresa May, this will happen in March this year but even with this in the pipeline, it’s fair to say that no one can be sure what will happen post-Brexit, but we’ve already seen price increases of products due to a weakened pound. In October, Unilever’s CFO, Graeme Pitkethly, told investors that “prices should start to increase to cover the cost of imported goods due to weaker sterling” – a point of contention between companies. Any changes to immigration laws are likely to impact the UK’s supply chain. A significant proportion of UK supply chain workers are EU nationals, so if changes are made to immigration policy, UK businesses may need to reassess how they recruit.
However, more control over trade deal negotiations could lead to favourable deals, increasing access to global markets and potential trading partners. In the longer term, free-flowing capital may drive investment, where infrastructure development increases the ability of businesses to step-change operations, helping to uncover new opportunities for growth.
So, is uncertainty the only certainty we have? Well, we certainly are entering a time of unprecedented complexity. There will be structural changes to the retail industry, many of which require supply chain investment. On top of this, Brexit will call for an adaptable approach and sometimes, brave decision-making. Businesses able to sense opportunities to get a jump on competitors in these conditions will succeed. We’ve seen it in 2016, and I’ve no doubt we’ll see more of it in 2017.
We’ll have our ear to the ground, bringing you all the latest developments…
Supply Chain & ECR Co-ordinator, IGD