To Balance Consumer Cost and Convenience, Rethink Your Supply Chain For 2024

By Noah Hoffman, Vice President for Retail Logistics, C.H. Robinson

Store parking lots were full of cars and shoppers’ front steps were full of deliveries leading up to the holidays. But with costs for housing and food rising, savings from the pandemic getting depleted, and credit card and loan delinquencies already up, consumer spending is likely to lose steam in 2024.

To maximize sales in that environment, retailers will be challenged to find the supply chain strategy that meets shoppers’ expectations for both cost and convenience.

On the cost side of the equation, consumers may trade down to store brands or defer larger purchases as long as they can. On the convenience side of the equation, they still want to see a selection on your shelves when they’re ready to buy and still want options for ordering an item online, picking it up at the store or having it delivered. Omnichannel retail is inherently more costly for the retailer. But if the consumer actually paid the full cost of getting a 48-pack of toilet paper delivered to their house, it would cost more than the toilet paper.

The savviest retailers are moving away from a one-size-fits-all of products through their supply chain, tailoring their strategies to the size, type, and demand for products.

By Noah Hoffman, Vice President for retail logistics at C.H. Robinson

The savviest of the 7,500 retailers C.H. Robinson serves are solving this dilemma by moving away from a one-size-fits-all flow of products through their supply chain.

For smaller-size items, it’s most cost effective to transport them in bulk to your stores or to multiple fulfillment centers close to your customers. You’ll stay in stock for the in-store shopper and your delivery costs for online sales will be lower. A perfect example is the clutch purse my wife just ordered. It was shipped from a local store. If the store has 30 of those, it’s a lot cheaper to ship from there than to pay the expedited cost for each one to travel longer distances from the manufacturer.

For bigger, bulkier or irregularly shaped items, consider drop shipping those direct from the manufacturer in order to eliminate the costs of special handling along the way. That doesn’t mean you should resort entirely to drop shipping. If you carry 10 different washing machines, you could keep the three most popular in stock for customers to take home or for same-day delivery. The models that are more expensive or come in less common colors can be shipped from your vendor.

Rule of thumb: The smaller the item, the further it should go into your supply chain in bulk for economy of scale in your transportation. The bigger the item, send it directly from the manufacturer to the customer when you can.

The State of the Retail Industry 2024

JAN 2024