Disrupting the High Street

I predict a riot on the high street. Not the kind of mayhem that enveloped London and several other UK cities in 2011. That was criminal opportunism powered by unbridled and naked greed that looted and stole from the high street. The coming riot will be powered by technology in partnership with merchants and retailers, giving them unprecedented access to consumers like never before. Unlike in 2011, this disruption will gradually evolve rather than sparked by a singular event. It will ride on the waves of three major trends that are shaping the way consumers engage with merchants and retailers online.

Instant gratification at the tap of a button

First, ‘Click & Collect’ services are expanding the definition of convenience stores. Consumers now expect to buy most goods and services online. Most of the early barriers to online transaction have been removed, and the use of tablet and mobile devices is driving a significant rise in online shopping habits. By 2018, the number of products ordered online is expected to grow to 1.35 billion. 

Food orders are predicted to exceed that of the order for books, which interestingly was the vertical that kick-started amazon.com ecommerce platform in the 1990s. Local merchants and retailers have been responding to this demand by offering ‘Click & Collect’ options to consumers via their own eCommerce websites and mobile apps. Click & Collect volumes are expected to grow as online demand shifts from traditional eCommerce platforms to local retailers that offer collection services.

Secondly, there is a growing demand for instant gratification from products and services. The Uber effect is now mainstream. A large number of businesses are now based on systems that match jobs with independent contractors on the go, thereby supplying labour including local delivery service on demand. The on-demand economy will grow as more entrepreneurs, leveraging on the ubiquity of mobile phone technology, apply the model to more products and services that can be delivered within an hour or less. They provide convenience and choice as well as reducing the distance and time between consumer and product. The on-demand model is already disrupting the restaurant industry causing the blurring of the long-held line between places that do takeaway food delivery and the ones that don’t. Restaurant-quality meals can now be ordered to the door within minutes and at the tap of a button. Consumers will increasingly expect similar service from regular high street retail stores as the on-demand services become more mainstream.

Thirdly, the ability to tap underused capacity through the sharing economy is changing the cost of delivery. This is the Airbnb effect in which people’s assets such as time, vehicles, apartments and skills can be shared with others, mostly in exchange for monetary compensation. We are seeing a significant challenge to the ideological dichotomy proposed by Karl Marx, which divides the world into people who owned the means of production - the bourgeoisie - and people who worked for them - the proletariat. The division is now between people who have money but have less time and people who have time but have less money. The effect of sharing economy on last-mile logistic space will be pervasive as students and many others with spare time capacity seek to monetise this asset in exchange for cash. Advances in anticipatory dispatch and tracking technology will make it easier to organise and manage large volumes of point-to-point deliveries at scale.

Last mile, last man standing

It is clear that the next battle in eCommerce will be fought over last-mile delivery. Whoever owns the space will reign for a long time. Pure play retail premised on delayed gratification and shop visit will decline. Retailers will be challenged to find solutions to support increasing demand for same-day delivery. However, this will put significant pressure on supply from the limited pool of local delivery workforce. Competition for and compensation to delivery drivers will increase as the on-demand market becomes further fragmented due to the low entry barrier. Building in-house delivery infrastructure will be unsustainable in the long run for most retailers. Outsourcing the logistics to a specialised delivery network that aggregate demand across various merchants and retailers holds the promise of reducing cost and improving efficiency.

Delivery-as-a-Service

Whilst there are growing numbers of marketplace consumer platforms that provide hyperlocal on-demand delivery service, there is a strong case to be made for an enterprise logistics solution that is integrated into an existing eCommerce platform. Merchants and retailers that currently offer ‘Click & Collect’ service can add a fulfilment option into their checkout process. This will be a ‘Delivery-as-a-Service’ model that enables retailers to offer same-day delivery from their stores without losing ownership of their customer experience, data and transaction process.

The logistics companies that will power the last mile deliveries are not going to be the regular ones. Fundamentally, they are going to be Tech Companies using smart algorithms to increase human efficiency. They’ll provide both the algorithmic fulfilment technology and the hyperlocal delivery network. They’ll be light on hardware infrastructure and heavy on community engagement. Crowdsourced independent workforces working out of their bicycles, mopeds, cars and vans will be the power behind this movement. No depot, no base, just equipped with mobile phone and time to spare. Orders are algorithmically matched to the most suitable person that can deliver within minutes of the customer tapping the checkout button. The delivery person is more than a guy in a white van, but could be a mate, classmate or a neighbour that has joined the delivery network as a courier. Peer-to-peer delivery. Rather than build another B2C consumer marketplace, the logistic platform acts as a service provider that connects merchants and retailers with community-based independent couriers. This will allow merchants and retailers to leverage their existing inventory and sales channel to fulfil local demand and transform their stores into local distribution centres. It’s an opportunity for local independent retailers to buck up to eCommerce giants such as Amazon, Ocado and Tesco.  

One of the hallmarks of the late 90s dot-com boom is the promise of convenience, choice and the shortening of time between consumer and product. We now have all the components to make this happen. Let’s start the riot.