Commercial Real Estate

CRE Opinion: E-commerce—Driving the Wrong Way on A One-Way Street

Returns are throwing a wrench into the sleek, simple, one-way distribution networks logistics teams have relied on for years.

Randy Thompson of Cushman & Wakefield
Randy Thompson of Cushman & Wakefield

Recently, at a conference with Cushman & Wakefield’s Industrial Leadership Team in Chicago, we were discussing, among other things, trends in distribution networks and how the emergence of e-commerce is giving logistics experts nightmares. Following our meeting, the lot of us participated in two days of discussions with our firm’s retail team. What surprised me was how many of the challenges our brick-and-mortar retail clients are facing mirrored or impacted those on the logistics side.

Coming out of our discussions, the consensus was this: Traditionally, the retail teams and the distribution/logistics teams were distinct entities; but no longer. Instead, the two teams must work as one, integrated operation. And for most major consumer-oriented businesses, this is a whole new paradigm. Why? Because in the old days, logistics was a one-way street. Goods were packaged by the pallet, sent to retailer locations, where there was a mini-warehouse in the back. Shelf-stockers would de-palletize product and put it in the retail space. But now, consumers are increasingly buying all kinds of goods online. And suddenly, logistics teams are staring squarely in the face of an issue the brick-and-mortar teams have faced since time began.

Consider the following: In years past, when I wanted to buy a pair of Levis, I bounded into my car, drove to the nearest Dillard’s or Kohl’s, had a look around, found a couple styles I liked, tried on a few pair, found the pants that fit me best, and then left the rest behind in the dressing room for a clerk to deal with. (Oh, I can hear some of you now; “You just leave the rest behind for someone else to deal with?” Yes! That’s what they are getting paid for. Nobody in the history of ever restocked stuff they just tried on and you darn well know it!)

But now, let’s bring that 1990’s consumer behavior into the e-commerce age. If, instead of writing this life-altering article, I was logged onto the Levi Strauss website (note we have now cut the brick-and-mortar retailer out of the equation), I similarly browse their inventory on-line, find some styles I like…but wait, I can’t try them on. Hmm. What to do? Well, since I need to try them on to find the best fit, I’ll “buy” three or more pair of the same style knowing full well I’ll be sending back those I don’t like or those that don’t fit.

So a few days later, I get home from work, and assuming some porch-pirate (Google it) has not made off with my goods, I try on the pants, decide to keep two of the six I “bought,” and then return the rest. Problem solved, right? For me at least, yes. But now, there is not a clerk waiting around to restock my rejects at $7.25 an hour; instead, I stuff them in a box and send them on their way. That’s where the nightmares start. The logistics team’s once, sleek, simple, one-way distribution network is suddenly a two-lane street, and they have to deal with an issue that was once the exclusive domain of the brick-and-mortar retailer: returns! In this scenario, there is no clerk going into my recently vacated dressing room because I never stepped foot into their store. Instead, the Levis store came to me. So now, my box of returns shows up at a I-have-no-idea-where-nor-do-I-care re-packing operation where someone opens the box, dumps the unfolded clothes (that’s right, I don’t fold either) onto a table where they refold and restock the product so when they show up at the next guy’s door they look good as new.

Although this may appear to some as a simple shift of labor—from the store to a repack operation—trust me on this, there are a lot of $300-an-hour consultants making a fortune helping all manner of retailers (both brick-and-mortar and e-tailers) figure out the best way to handle this new market reality.

For consumers like me—and like most of you, whether you refold or not—the only thing that would make the process simpler and more convenient would be to let me order product online, have it come to my house via a robot of some sort (see what Marble is doing in San Francisco), let me try it on while the robot waits patiently curb-side for me, and then based on what I put back into the robot, only charge me for what I keep. Now that would be slick, right?

It’s coming, people, trust me on this. But that’s probably a blog for another day.

Randy Thompson is senior managing director of U.S. Corporate Project Management and Global Occupier Services for Cushman & Wakefield.