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Articles › Last-mile • Oct 29th 2024

The State of Retail Distribution

Wise Systems

Wise Systems

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When you think about shopping, your mind might immediately jump to e-commerce giants like Amazon. Amazon is definitely one of the biggest retailers in the world (second to Walmart), but in reality, most retail shopping — about 84% — still happens in person.

According to the National Retail Federation (NRF), e-commerce peaked at nearly 19% of retail sales during the COVID-19 pandemic in April 2020 but has since dropped to about 15% of retail sales.

Regardless of whether these products are sitting on store shelves or in an e-commerce warehouse, retailers rely on distribution systems to put products in customers’ hands.

Retail distribution is a booming business in the United States. In fact, North America is the second-largest region in the world in terms of logistics; it brought in $2 trillion alone in 2020.

The Asia-Pacific region remains the largest, accounting for $3.9 trillion in 2020. However, a report from Benchmark International indicates that North America is expected to be the fastest-growing region from 2024 to 2027.

Despite being a critical business process, retail distribution is far from foolproof. Without careful management, distribution can easily chip away at your profitability. It’s no wonder why 63% of business leaders want to increase supply chain efficiency and 59% want to slash costs.

Retail distribution is a must-have to keep up with both retailers’ and customers’ demands in an increasingly competitive marketplace. In this guide, we’ll explain what retail distribution is, where the market stands today, and trends that will shape the future of this booming international industry.

In this article:

What Is Retail Distribution?

Trucks at a distribution center

Photo by Marcin Jozwiak from Unsplash

Retail distribution is the process of moving physical goods from a manufacturer or a storage facility to the end customer. It’s a complex operation that demands careful coordination across multiple processes, factors, and variables — all at the same time. From transportation to warehousing to logistics, distribution is a multi-faceted endeavor that requires precision and resilience.

Every organization handles distribution differently, but at its core, retail distribution manages:

  • Distribution channels: Shoppers can find retail goods either online or in-store. Their preferred shopping method will have a huge impact on your retail distribution strategy.
  • Supply chain: Supply chain management looks at how products move between vendors and retailers. Any hiccups in one leg of the supply chain, especially upstream, can spell future problems for other areas of the supply chain. That’s why it’s so crucial for retailers to only work with reputable suppliers.
  • Inventory: Retail distribution requires inventory management to ensure the right products are always available in the right channels. Otherwise, you risk stockouts, leading to poor customer experiences that harm sales.
  • Logistics: Logistics software helps retailers coordinate transporting, warehousing, and delivering items to either stores or end-customers.

As you can see, a lot goes into retail distribution. While it requires tracking hundreds of elements at once, it offers tremendous benefits. Effective retail distribution allows you to reach a broader market, slash expenses, and even speed up time to market.

Retail Distribution Market Size

Train cars and freight containers

Photo by Kelly from Pexels

Consumers worldwide clearly love to shop. Retail brings in a staggering $28.2 trillion every year on average — with $20.8 trillion coming in from physical stores. The retail industry accounts for 6.3% of the US GDP, or $7.2 trillion.

Walmart is the US leader in brick-and-mortar retail, but it’s no surprise that Amazon reigns supreme when it comes to US e-commerce. The retail industry — including workers in logistics and the supply chain — employs over 32.3 million people in the US.

But that’s just retail. Retail distribution and logistics is also a booming industry. Globally, the logistics market is worth $9.4 trillion, but experts say it will be worth over $14 trillion by 2028.

The industry is growing at a compound annual growth rate (CAGR) of 9.35%, making it possible for the global retail distribution market to be worth $22 trillion by 2033.

Retail Distribution Technologies and Innovations

Worker driving a forklift in a retail distribution center

Photo by ELEVATE from Pexels

Retail distribution requires effectively managing many moving parts. It’s shocking that 80% of US warehouses still operate manually, especially considering the wide variety of software on the market.

Fortunately, retail distributors are changing their tune. Fifty-two percent say they need to prioritize inventory visibility, and 29% say they need help connecting disparate systems.

Every distributor follows different processes, but these retail distribution technologies provide a leg up for businesses that embrace innovation.

Automation and Artificial Intelligence (AI)

AI and automation are all the rage. While these technologies have become commonly used buzzwords, reputable software solutions fix your most significant problems through the power of AI.

For example, Route Planner from Wise Systems maximizes fleet efficiency using traffic and weather data, customer preferences, and other factors to find the best routes in seconds. Book a demo now to learn more!

Chances are, there’s a solution on the market for your business’s needs. Here’s a breakdown of the growth of tech in retail distribution in the last year:

More retail distributors are also adopting all-in-one software. For example, 67% of executives say their warehouses use a warehouse management system (WMS). The usage of computerized maintenance management systems (CMMS) also increased from 13% to 48%.

But it’s not all sunshine and roses. Forty-eight percent of leaders say budget issues prevent them from embracing this technology, while another 30% say training employees on these new systems is too difficult. Doing things a new way can be challenging, but it’s better to innovate today instead of making changes later, when it’s usually too late.

Big Data

More data isn’t necessarily better. You need a way to parse through and derive actionable insights from this information — otherwise, it’ll just sit there, useless and untouched.

That’s where Big Data solutions come in. For example, Wise Systems’ Performance Manager, driven by our AI-driven Dynamic Optimization Engine (DOE), tracks your leading indicators, identifies trends, and pinpoints crucial changes to help you make data-driven decisions in less time. Book a demo today to discover how the Wise Systems delivery automation platform makes real-time decisions to improve your operational performance.

A human analyst would take a few days to reach the same conclusions. It’s no wonder why 60% of retail distribution businesses plan to use technology to improve their supply chain data analysis. In fact, better planning in your supply chain can increase revenue by 4% and reduce inventory by as much as 20%.

Robotics

There are 2.6 million job vacancies for truck drivers globally. To make matters worse, labor costs rose by 6.2% in 2022. Forty-four percent of COOs are understandably worried about worker shortages and turnover.

To complicate matters, pick and pack fees range from $3.13 to $4.33 per item. The bottom line is that businesses struggle to fill necessary positions, which drives up prices and leads to inefficiencies.

You can’t replace all of the humans in your supply chain, but more businesses are leaning on robotics to fill in the gaps when they can’t source human labor. The mobile robots market was worth $2.5 billion in 2020, and it’s expected to grow tremendously in the coming years.

Robotics usage increased from 22% to 32% in warehouses, so this is a new but fast-growing trend with big implications for retail distribution.

Warehouse workers moving goods at a retail distribution center

Photo by Tiger Lily from Pexels

Like any industry, retail distribution experiences its fair share of changes. The COVID-19 pandemic, in particular, revealed gaps in the supply chain that businesses are still resolving through technology and more flexible approaches.

These five trends promise to change the face of retail distribution in the coming years.

1. Consumer Demands for Convenience

It all started with Amazon’s Two-Day Shipping, and Amazon continues to lead the industry in ever-shortening delivery timelines. In fact, during the first three months of 2024, Amazon delivered more than two billion items the same day or next day.

Today, shoppers expect two-day or even same-day shipping for products ordered online. And if they go to the trouble of visiting a physical storefront, they expect you to roll out the red carpet.

Shoppers expect more from retailers. Since retailers are in the hot seat, they now expect their vendors and distributors to deliver excellent service on tightening timelines — while also providing visibility throughout the process.

That might mean using a solution like Customer Portal from Wise Systems, which provides a sleek, white-labeled platform that automatically updates customers during every leg of the shipment’s journey. Request a demo today to learn how Wise Systems’ solution can improve communication and boost customer satisfaction.

Real-time tracking and SMS or email updates are the bare minimum for excellent service, and both retailers and customers will demand this from their distribution partners.

2. Click-And-Collect

While the majority of retail purchases still happen in-store, many shoppers prefer online shopping. The catch is that last-mile logistics is costly and complex.

Solutions like the Wise Systems delivery automation platform do the heavy lifting to make the process faster and more affordable, but even then, distributors may need help to keep up with demand.

That’s why more companies now offer a range of click-and-collect or “buy online pick up in-store” (BOPIS) options. In fact, 50% of retailers plan to provide these features, with two-thirds of retailers aiming for BOPIS this year.

BOPIS generated $7.4 billion just in grocery sales in the US last year, and click-and-collect generated $96 billion in total. Many customers love options like curbside pickup, reducing the need for businesses to invest in extensive last-mile infrastructure. It can be a real win-win!

Putting clothing in a box for shipment

Photo by Karolina Kaboompics from Pexels

3. Personalization

Retailers are increasingly worried about personalization as competition intensifies both within and between channels. Brick-and-mortar stores and e-commerce platforms each have their own competitive landscapes, but they’re also competing against each other. To gain a competitive edge, brands are leaning heavily on experience and personalization to attract shoppers.

In fact, 54% of retail executives say they prioritize personalizing the shopping experience; 52% of business-to-business (B2B) companies say they’re spending more on personalization technology, too.

Retail distributors focus their energy on prompt, affordable delivery, but that won’t be enough going forward. Retailers need help personalizing every stage of the customer journey, including distribution and delivery. Distributors can expect demand to soar for:

  • White-labeled solutions
  • Personalized SMS and email notifications that use customer shopping history or personal details, like their name, to stand out
  • Customized delivery instructions for every customer

4. Sustainability

More shoppers care about their carbon footprint today than ever before. In fact, 72% of shoppers considered the environmental impact of a product before buying it.

This trend is already having an impact on retailers, with 29% of companies calculating sustainability metrics in 2021 — that’s a 7% YoY increase.

Retailers and shoppers expect distributors to take sustainability more seriously. Fortunately, investing in sustainability can also make you more cost-effective.

For example, route planning automation software determines the most optimal routes, minimizing idling and fuel use. Whether it’s investing in electric vehicles (EVs) or embracing green energy at your fulfillment centers, going green benefits both your wallet and your client relationships.

5. Micro-Fulfillment Centers

In decades past, retail distributors could get away with having a few large distribution centers spread across the country. But in today’s climate, it just isn’t practical for retail distributors to transport goods from so far away.

That’s why 53% of supply chain executives expect to use regional distribution centers by 2030. Estimates say there will be at least 962 micro-fulfillment centers in the US by 2025.

You don’t have to guess at the best locations, either. Moving forward, more distributors are using tools like Strategic Planner from Wise Systems to pinpoint the perfect places for their micro-fulfillment centers.

These solutions use real-time and historical data to create the best strategic plan for your warehouses and fulfillment centers. Book a demo to discover how the Wise Systems delivery automation platform can improve your strategic planning processes to boost performance.

Retail Distribution Success Starts Here

Retail distribution is the cornerstone of the shopping world. From AI-powered automation to eco-friendly solutions and micro-fulfillment centers, the future is all about smarter, faster, and more sustainable ways to get products into customers’ hands.

It might seem overwhelming with so many moving parts — inventory, logistics, supply chains — but with the right tools and strategies, businesses can streamline operations and stay ahead of the game.

There’s no need to manage everything yourself, either. Go with Wise Systems to make your last mile your best mile. Request a no-strings-attached Wise Systems demo now to simplify retail distribution.

Frequently Asked Questions

Is retail distribution different from logistics?

They’re closely related, but they’re not quite the same. Retail distribution moves products from manufacturers or warehouses to the end customer, whether online or in-store.

Logistics, on the other hand, covers the entire process of managing transportation, warehousing, and the flow of goods throughout the supply chain. Essentially, logistics is a broader process, and retail distribution is one aspect of it.

How can small businesses improve their retail distribution process?

Retail distribution can be tricky, but small businesses can become more efficient with the right tools and processes. Leveraging automation tools, partnering with third-party logistics providers (3PLs), and focusing on better inventory management are the keys to success.

How can retail distributors handle supply chain disruptions?

Supply chain distributions can happen through no fault of your own. That’s why choosing a diverse spread of high-quality suppliers is so important.

Real-time inventory tracking and predictive analytics can also help you forecast demand and stay ahead of potential disruptions. Be open to sourcing locally or regionally to reduce risks caused by global events, like war or a pandemic.

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