Senior Client Partner, North America Retail Sector Leader
This Week in Leadership (July 19 - July 25)
What the Delta variant means for office returns. Solving the labor shortage with returnships. Plus, tips for how to be a great board director.
I see it. I like it. I want it. I got it.
A lyric from singer Ariana Grande’s hit “7 Rings” may be the best way to describe the post-pandemic future of e-commerce.
Building off of their success delivering groceries, toilet paper, medicine, and other goods to customers during the COVID-19 lockdowns, food-delivery apps are teaming up with mass-market retailers for what they call “next-hour commerce.” On the app side, they bet that offering more products on demand will attract new users and help them grow profitability. For retailers, the partnership offers the potential of speeding up so-called last-mile delivery. Though many retailers already offer same-day delivery—place your order by noon and get it by 9 p.m., for instance—consumers increasingly expect e-commerce to mimic the in-store experience, meaning they want their products delivered as soon as they buy them.
Denise Kramp, a senior client partner and the North America retail sector leader at Korn Ferry, says the retailers that won during the pandemic were the ones that could provide customers with real-time access to their inventory, not just through curbside pickup but also via delivery. “The ability to deliver products in an hour is there if they have the inventory,” says Kramp. To be sure, Amazon, Target, and others were able to deliver orders in less than two hours in some markets during the pandemic.
In fact, food-delivery and ride-sharing apps face a three-pronged challenge with next-hour delivery. On one side, they are competing with big-box and other retailers who are building out their own scalable last-mile services. On the distribution side, they are up against the likes of FedEx and UPS. And when it comes to local mom-and-pop restaurants or independent retailers, the merchant fees are still too expensive to make using the apps worthwhile, says Christian Hasenoehrl, a senior client partner and global account leader at Korn Ferry. “Cost is a real issue with most of these services,” he says, adding that the opportunity for these apps is in carving out a niche in between the big-box retailers and the mom-and-pops. “Their future may well be in providing next-hour delivery to retailers and restaurant chains that find it too cost prohibitive to build up their own delivery capabilities,” Hasenoehrl says.
Of course, there’s one huge problem that could derail efforts on all sides: talent. Kramp says retailers are struggling to find enough inventory-management talent, including specialists in logistics, distribution, demand planning, fulfillment, and management. “They are looking for professionals who can understand the technology and implement the systems to do this,” she says.
Job listing sites like Indeed, Monster, and CareerBuilder are seeing huge increases in postings for tractor-trailer, light-truck, delivery, warehouse, and logistics openings, with the sector ranking among the top 10 in adding jobs recently. Officially, the US Bureau of Labor Statistics shows job vacancies in transportation and logistics exceeding hiring by about 2 million, with more than 8 million positions currently available. One reason for the gap is that many of these positions were cut during the pandemic—about 400,000 jobs have been lost since December.
In fact, many of those laid-off workers became part of the gig economy, going to delivery apps to take advantage of the flexible scheduling during the pandemic, says Melissa Hadhazy, a senior client partner in Korn Ferry’s Industrial practice. “That is causing more strain on the logistics’ traditional shift model, especially in warehouses and distribution locations,” she says.
At the same time, however, the increasing importance of logistics means companies need to find permanent full-time talent. One way they are trying to do that is by offering more money. “Pay is rising fast,” says Hasenoehrl. But the disconnect between the need for workers and the price of labor is also forcing companies to pursue nonhuman options for delivery, such as automated driving, robot deliveries, and drones. Ultimately, says Hadhazy, all the current efforts may amount to little more than an interim solution while nonhuman delivery “slowly matures in the background.”