The Rise of Micro-Fulfillment Centers in eCommerce

Online grocery shopping has become increasingly popular due to the pandemic. Retailers have quickly adopted micro-fulfillment centers to keep up with demand and meet delivery expectations.

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Consumers have a healthy appetite for online grocery shopping. Between 2019 and 2020, grocery eCommerce sales grew from $62.2 billion to $95.8 billion. In 2021, sales are expected to top $100 billion. To keep up with demand and delivery expectations, many grocery retailers turned to micro-fulfillment centers. 

Micro-fulfillment centers are small fulfillment centers that serve eCommerce and as pick-up locations. These small-scale facilities (typically less than 100,000 square feet) are often located in densely populated areas which allows companies to pack and deliver orders to many customers in a short amount of time. 

Like the grocery industry, DTC companies face unique eCommerce challenges, including fulfillment and shipping. Implementing a micro-fulfillment center (MFC) strategy may help brands face those challenges. 

Why Does the Micro-Fulfillment Center Trend Matter?

While micro-fulfillment center growth has largely remained centered around food and groceries, the demand for quick delivery will likely not stay solely in that space for long. It is already seeping into other industries.

In the past 15 years, two-day delivery has transformed from a luxury to a necessity for many retailers. As Amazon continues to drive a faster pace for delivery and fulfillment, DTC retailers are looking for new ways to catch up and stay ahead. MFC technology is also attractive to third-party services that can build and run the physical warehouses. These businesses then rent space and technology to companies looking to get in on the action.

For instance, Nordstrom has recently entered the MFC space by partnering with Tompkins and Attabotics to test a new facility in the San Jose, California, area. Nordstrom hopes this investment delivers orders faster and redefines how it builds and stocks stores. This includes expanding their Nordstrom Local stores — inventory-free facilities where customers can go for fittings, manicures and pedicures or stroller cleanings. Online shoppers can also designate a Nordstrom Local store to pick up orders.

As more companies begin to radically rethink their logistics, MFCs will continue to be at the forefront of innovation. Problems stemming from labor shortages, supply chain squeezes and competition for space are accelerating the adoption of MFCs across many different industries. Soon, MFCs will be present in more than just online grocery delivery, and customers will have many options for fast, inexpensive delivery of goods.

What Do Micro-Fulfillment Centers Mean for DTC Retailers?

DTC eCommerce retailers are paying close attention to micro-fulfillment centers as a solution to some of their unique challenges. Flexible automation solutions allow for easy scalability without added labor costs. Automation and robotic integration allow retailers to fulfill orders more quickly and accurately than humans and in a much smaller space.

Micro-fulfillment centers also allow retailers to store inventory closer to shoppers. This saves on shipping and storage costs. In addition, customers can receive their orders faster, which is a more satisfying experience than waiting days for a package to arrive. As consumers continue to expect faster delivery, DTC eCommerce retailers need to innovate to keep ahead of the competition. Major players like Amazon, Nordstrom and Kroger invest billions in fulfillment technologies, and those technologies quickly become the industry standard.

Warehouse automation specialists are quickly gearing up production to meet this increased demand. For DTC eCommerce retailers, solving the next- or same-day delivery puzzle will be crucial to their survival. Implementing MFC solutions now will allow for greater scalability and profitability in the future.

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