Digitalization is fundamentally changing retail trade and logistics. What does the future hold in store for brick-and-mortar stores? The European EHI Retail Institute offers nine scenarios.  

Will retail continue to dominate the supply chain? Or will logistics service providers and new intermediaries take the lead? Although no one can answer these questions with any degree of certainty, a group of industry experts organized by the European EHI Retail Institute collaborated to project different scenarios based on trends and developments that can reshape the retail logistics sector.  

The team consisted of 31 logistics experts from 10 retail companies operating in the food, hard goods, textiles and home improvement sectors as well as nine service providers in the fields of strategy consulting, IT and logistics. Over three one-day workshops, the experts identified a total of 22 key factors impacting retail logistics. They came up with nine scenarios to support strategic planning decisions.  

How will digital retail be in the future?  

Although the trend seems clear, the central question remains to what extent certain areas of retailing will be shaped by virtual purchasing decisions and delivery services. The spectrum ranges from brick-and-mortar retail taking a leading role to the demise of this form of retail altogether.  

The various scenarios were outlined and correlated based on the future space mappingTM process. To improve understanding, they were given memorable names and clever images. The result is an “interplanetary” map that provides possible development trajectories.  

The Scenarios

Digitalization advances only moderately; customers still shop predominately in brick-and-mortar stores. Online retail develops as a separate segment with a cautious growth forecast. Demand and purchasing structures remain regional or local. Retail controls the supply chain based on a conventional understanding of logistics, without using advanced analytics.

The showrooming scenario: As a result of rising urbanization, metropolitan areas see the opening of large flagship stores run by manufacturers and new players. These showrooms offer a variety of shopping experiences. Traditional B2C logistics service providers handle deliveries due to the limited mobility of many customers.

The parallel scenario: Online shopping reports high growth rates, while brick-and- mortar stores seek to protect their position with new services such as click-and-collect. New intermediaries, including eBay and Google, use advanced analytics to segregate retailers and manufacturers pressing their way into retail with various offers from the logistics sector.

The virtual and physical worlds of retail merge further, coupled with increased personalization to meet customer preferences. New integrated retail services position themselves closer to consumers. The broad decentralization leads to a revival of neighborhood stores, which frequently serve as delivery points in the click-and- collect system. Manufacturers try to make direct contact with customers as well.

Purchasing decisions are made online, leading to competition for the increasingly integrated sales channels. Brick-and-mortar stores become a strong omnichannel business. While they lose significance in rural areas, they take over new functions and services in smaller areas of urban centers, allowing them to actively contribute to the growth of online retail.

Retail, which is still characterized by its physical presence, loses more direct customer contact to intermediaries that can better adapt to new consumer demands. Many retailers take on upstream functions with their own brand or production. The logistics sec-tor supports this realignment through value-added services, whereby they relinquish part of their own assets.

Urbanization and declining mobility lead to an online boom; traditional retail cannot measure up to the online boom and loses control of the supply chain as a result. Ultimately, stationary retail withers away with its limitation to traditional commercial functions and becomes a sales arm of the new players with global mindsets.

Changes in the digital world are fast and radical. Brick-and-mortar stores are in a downward spiral; many close and conventional retail disappears completely in many places. Other players fill the gap. The logistics industry, too, strives to strengthen its position through system integration and orchestration.

Online business hits its limits; customers still predominantly buy from brick-and-mortar stores. Digitalization shifts to preceding value-added measures and to logistics that no longer includes retail as one of its core competences. System integrators and orchestrators that process generated data and handle logistics processes are the dominant players.

Progress from the brick-and-mortar perspective  

These nine scenarios illustrate the degree of activity performed by retail in the supply chain and the degree of digitalization. All logistics structures and processes developed for this purpose must equally meet the demand for flexibility and low costs in the face of ever-accelerating change cycles. The business models of the future will find their feet only through efficient, high-performance logistics—whether this be a showrooming concept (Glamoroso), a complex, retail-driven supply chain (Kortex) or a purely on-line scenario (Deserto).  

“It is already clear today that companies are not following identical paths when it comes to their logistics strategy; however, it is also possible that the traditional roles of value creation partners will no longer apply tomorrow“, says Matthias Haubenreisser, Senior Manager of ECR Processes at GS1 Germany GmbH.  

The main problem will still be the same in 10 years: delivering the right quantity and quality of goods at the right time for the right cost and to the right location.

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