Rumor has it that micro-fulfillment will be one of the fastest-growing trends in logistics throughout the 2020s. If that’s true, then retailers, consumers, carriers, and our environment will only benefit from it.
How come? A few years ago, micro-fulfillment wasn’t really on anyone’s radar.
Fast-forward to 2020, and the rise of the quick commerce delivery model took grocery retail by storm. Many q-commerce companies — think Glovo, Foodora, or Delivery Hero — have adopted micro-fulfillment centers, or dark stores if you prefer, and expanded to online grocery delivery.
Focusing only on food and groceries though leaves many opportunities untapped. It’s high time for online retailers to embrace micro-fulfillment for good.
Tune in to find out:
- What exactly is micro-fulfillment;
- Where are the benefits of micro-fulfillment for e-commerce;
- What to consider before moving to micro-fulfillment.
What is micro-fulfillment?
Micro-fulfillment means fulfilling orders in small-scale warehouses that are located in densely populated areas — like capital cities, for example.
Traditionally, merchants depended on a few massive, remotely-located distribution centers, but placing automated micro-fulfillment centers (MFCs, in short) closer to the customer can suddenly make order deliveries much faster and greener.
Not to mention that MFCs don’t necessarily have to be built specifically for their purpose. They might be located in an existing retail store, or even a garage or a basement.
No matter the type of space, micro-fulfillment centers usually serve as a base for ship-from-store orders and local pick-up points. Sounds familiar? During the COVID-19 pandemic, some merchants already experimented with “dark stores”, even if they weren't aware of it at the time.
Now, micro-fulfillment is the next step e-commerce companies need to take to streamline their order fulfillment process — all while providing a great delivery experience.
It's no longer only the busy and impatient consumers who expect next- or same-day delivery. For the majority of online shoppers, last-mile delivery has to be both fast and low-cost. Then, it also helps if it’s sustainable.
That’s precisely what micro-fulfillment centers help to achieve.
Micro-fulfillment benefits for e-commerce
Micro-fulfillment disrupts the traditional warehouse op and offers a brand-new delivery experience when shopping online:
- Once a consumer hits the buy button, the system sends a request directly to a local micro-fulfillment center that holds the right inventory;
- In a few moments, the order is packed, labeled, and ready for pick up by the assigned carrier that has already accepted the order based on a specific delivery area;
- When it’s ready, a courier goes to the store, gets the parcel, and delivers it to the buyer.
As simple — and fast — as that. And the best part?
Micro-fulfillment centers don’t only allow for faster delivery, but also a more sustainable one. In fact, according to a report from Accenture, the last-mile supply chain made possible by local fulfillment centers could lower last-mile delivery emissions by 17–26% by 2025.
To start with, retailers can introduce shorter but more frequent delivery loops at less congested hours and use electric vehicles. For those who own local stores and sell online, an even higher climate effect can come from reducing overproduction, waste, and the need for aggressive sales and discounts.
— By enabling store-to-door delivery, online retailers can suddenly make their whole total inventory available for the total market. Sure, they should ship locally whenever possible to reduce last-mile carbon emissions, but by being able to also ship certain products from a local store to a customer across the country, they will also match supply and demand much better, thus reducing the need for both local and central safety stocks across the full assortment. I think this is a great example of how smart logistics can be used to make retailers more sustainable and profitable, logistics consultant Martin Jungerts commented in an interview with Columbus.
To sum up, micro-fulfillment has the following advantages:
- Faster order deliveries — store-to-door solutions enable faster deliveries, especially when the items are already on-shelf.
- More sustainable, greener delivery options — store-to-door solutions can not only shorten the delivery time but also contribute to lowering greenhouse emissions, especially when partnering with local, carbon-neutral shipping companies.
- Higher inventory efficiency — with MFCs, retailers can split inventory, leverage the entire stock value, and match supply and demand much better.
- Cost savings — micro-fulfillment centers allow for reduced transportation costs, streamlined order fulfillment operations, and reduced labor expenses.
- Better delivery experience for customers — both in-store pick-up and shipping from a local micro-fulfillment center mean faster and more convenient order delivery.
That’s precisely why more and more brands are moving towards micro-fulfillment. Should yours, too?
What to consider before moving to micro-fulfillment
Despite plenty of benefits, micro-fulfillment is a high-level strategy that should be well-thought-out before being implemented. Here’s what to consider if you’re on the fence, as advised by logistics expert Britain Ladd:
- What products, if any, should be fulfilled from micro-fulfillment centers? Items that take less space and can be stocked in volume (like clothes, cosmetics, or books) work better with MFCs than larger products.
- Where are the best places to forward and deploy inventory? Knowing which items are most likely to be purchased and matching them with what’s in demand in specific areas that surround micro-fulfillment centers is crucial.
- Should the delivery strategy include same-day delivery? If so, keeping the inventory in the right micro-fulfillment centers is even more essential to ensure fast delivery.
- Should order fulfillment be completely outsourced? With micro-fulfillment technology evolving fast, retailers can either team up with third-party logistics providers or 'deploy' MFCs on their own.
Once you have clear answers to these questions you can start thoroughly evaluating the capabilities of logistics companies that offer micro-fulfillment or go at it alone — especially if you already own retail stores in popular areas.
Partner with trusted MFC solution providers
Thinking of to turning your retail store into a micro-fulfillment center? At Ingrid, we support merchants in using their brick-and-mortar stores as MFCs, both for last-mile logistics and as pick-up points across the globe.
Essentially, Ingrid In-store is a 'point of delivery' system, similar to the 'point of sale' system that cashiers operate — in other words, an operating system for delivering things to and from the merchant's store.
It has two modules that can be used together or separately: 1) click & collect, and/or 2) ship-from-store with the use of local carriers (including q-commerce companies), or the merchants' own transportation. This results in much cheaper, faster, and more flexible deliveries.
If you’re curious to see how it works in practice, one of the brands that excelled at making the delivery promise greener and faster with Ingrid In-store solution is Nudie Jeans.
Instead of shipping all the way from their warehouse in Sweden with an international courier, Nudie Jeans turned the existing stores into MFCs and started fulfilling online orders directly store-to-door.
— The ‘ship from the store’ approach that we’ve developed with Nudie Jeans has a dramatic effect on emissions both internationally and locally, ensuring that international shipping is done in bulk while local is done emission-free. We are really thrilled by how this can be an example others in the industry can follow.
Currently, local Nudie Jeans stores fulfill 30% of online orders in the UK, Australia, Germany, the Netherlands, and Sweden, and there are more markets to come.
Still wondering if micro-fulfillment is the right move for your e-commerce business? Book a demo to discuss your options.