LEVERAGING PORTS AND CARRIER SERVICES FOR PROFIT
Big-box Retailers Turn Additional Profits by Becoming 3PLs for Hire
Challenges facing big-box retailers in today’s online shipping world were revealed as far back as 2009, with the publication of Forbes contributor Christopher Steiner’s $20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better (Grand Central Publishing). The author runs through the ways Wal-Mart became a global retail giant, from leveraging cheap labor in China, to low-cost shipping via ocean carriers, to dominance at West Coast ports, to product movement by rail and trucks to 140 distribution centers, to a fleet of 7,200 semi-tractor trailer trucks fanning out to 4,000 US stores.
Steiner argued at the time that such a model would not be sustainable with the rise of gasoline prices, not only because of the financial hit Wal-Mart’s own transportation network would suffer but because customers would be less likely to drive to its brick and mortar stores that were generally on the outskirts of towns or even farther away in suburbs. The author suggested Wal-Mart’s survival might hinge on returning to founder Sam Walton’s origins of opening much smaller, Main Street stores.
However, since the publication of $20 Per Gallon, Wal-Mart has obviously looked toward its future in light of the success of a certain online retail giant that rhymes with “slamazon,” choosing to enter the same arena with its own in-house know-how of international manufacturing, ocean carrier and port services and domestic warehousing, distribution and transportation.
Big-box retailers doing the same have discovered they can not only thrive but turn additional profits by becoming 3PLs for hire, according to PwC, a global accounting practice that was founded a century ago in London. In its 2015 report “Shifting Patterns: The Future of the Logistics Industry,” PwC noticed the rise of “total retail” models that had retailers operating across bricks and mortar, online mobile and other channels, which were complemented with “connected retail,” where operators aim to create seamless brand experiences for customers across personalized marketing, the physical store, the digital experience and payment options, all driven by a strong coherent brand. “Big retail players expand their logistics offerings to fill their own needs and beyond, effectively moving from customers to competitors,” states PwC. “They purchase small logistics players to help cover major markets, and draw on their deep understanding of customer behavior to optimize supply chains.”
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