Internet Retailing Will Require Greater Pallet Use, Study Finds
E-Tailing and Pallets: Pallet industry's leading researcher says that retailing methods of the future, including shopping via the Internet, will require increased unitization of products and pallet use.
By Staff Writer
Date Posted: 4/1/2001
Retailing methods of the future, including consumer shopping via the Internet, will require increased unitization of products and pallet use, according to the pallet industry’s leading researcher. However, increased levels of pallet use do not necessarily translate into increased demand for pallets, noted Dr. Marshall ("Mark") White, director of the Virginia Tech pallet and container research laboratory.
Mark’s research examined retailing trends, their various logistics systems, and reached findings regarding the relative impact of current and future changes in retailing on unit load handling practices and pallet use.
He delivered his report in January to the Pallet Foundation, which raises and dispenses money for pallet industry research and is affiliated with the National Wooden Pallet and Container Association, and gave an oral presentation on his report at the NWPCA’s recent annual meeting. The Pallet Foundation commissioned the study because it was concerned whether changing retail practices, particularly Internet commerce, might negatively impact pallet use.
American consumers are buying more products from the stores of mass merchandisers, such as Wal-Mart, K-Mart, and Target, and discount clothing stores and non-clothing specialty stores, Mark wrote in his conclusion. These outlets are replacing warehouse clubs, such as Sam’s Club and Cost-U-Less, and catalog retailers and department stores.
The mass merchandiser outlets deal with relatively large volume and a large number of stock keeping units (SKUs), and they have high-speed replenishment requirements. These factors make it necessary for efficient unit-load based materials handling methods and an increase in pallet use compared to the alternative retail outlets, which use fewer pallets.
In addition, Internet or online-based retailing based retailing — described by various terms and referred to as ‘E-tailing’ in Mark’s report — is growing rapidly. Mass merchandisers will dominate this new method, which is expected to mature as a retail outlet within four to seven years at about 10% of packaged consumer goods purchased.
One handling sequence of the product storage and distribution logistics cycle of case-based home delivery is not unitized, Mark noted, and therefore involves pallet-less handling. This trend could reduce pallet use in the future.
"However," Mark wrote, "E-tailing mass merchandisers will use existing unit-load based distribution systems, and home delivery parcel carriers will tend to unitize for a portion of their distribution cycle in order to improve efficiency in this expanding portion of the retail market."
"It is the conclusion of this study that the retailing methods of the future will require greater levels of product unitization and pallet use," he said.
The study did not include or consider potential changes in total volume, mass, or value of consumer goods purchased, Mark noted. In addition, pallet use and demand are not necessarily related because demand is affected by the relative use of returnable pallets. "Any unexpected change of use of pallet-less unitized loads could alter the conclusion of this study," he wrote.
An earlier study by another researcher made it clear that mass merchandiser, non-clothing specialty stores, and E-tailing is increasing, Mark noted. For example, between 1997-1999, the percent of consumers using department stores declined 13%, warehousing clubs, 12%, and supermarkets, 15%; over the same two-year period, the percent of consumers using mass merchandiser stores increased 13% and E-tailing, 100%, from 5% to 10% of purchasers.
American consumers want both low prices and convenience when they shop, and both are provided by the mass merchandiser store outlets. And the trend is expected to continue because it is being driven mainly by younger (18-to-34) age consumer groups, who are buying more.
The use of computers and the expertise associated with them are growing rapidly, making it inevitable that Internet-based purchasing will expand. Mark cited another study which noted that it was 50 years before radio reached 50 million households while television reached the same number in only 15 years. The Internet, however, reached the same level of use in only one year.
Although Internet retailing was started by specialized retailers that had no retail store outlets and were quickly followed by catalog retail outlets, mass merchandisers and other retailers adopted the method in 2000 and are expected to dominate E-tailing in the future.
The E-tailing strategy of mass merchandisers actually is to attract consumers to buy or "pick up" their purchase at the store location instead of buying the merchandise on the Internet. At stores, shoppers browse and buy more products; using they Internet, they are more product-oriented and browse less.
Mass merchandisers have a fundamental economic advantage: volume purchasing and distribution methods. Unit-load materials handling methods are desired for storing and distributing large volumes of a large number of SKUs.
Materials handling of mass merchandisers has evolved into a two-pallet system of full pallet loads from manufacturer to distribution center and palletized order-picked loads from distribution center to store outlet. "These logistics methods and the projected growth of mass merchandisers at retail outlets indicate more unit-load based handling of consumer goods in the future," Mark wrote.
Currently, most shipments from E-tailing fulfillment centers to customers’ homes are case-based and are not unitized on pallets. Case-based parcel carriers pick up mostly floor loaded full trailers at fulfillment centers and transport them to regional sortation hubs for final delivery to customers. However, one researchers has noted that, with the rapid growth of E-tailing, parcel carriers are exploring more unitized handling. In the future, more products purchased via the Internet will be unitized and consolidated on pallets at fulfillment centers for transport to the regional hubs.
In addition, the high speed and large SKU requirements of E-Tailing spur high levels of palletization between supplier-manufacturer and fulfillment centers, Mark wrote. "Ironically, the quick response requirements of E-tailing precludes made-to-order purchasing and distribution. The cased-based doorstep delivery system will require more storage, not less. To control distribution efficiencies, more unit-load handling and more palletization will be necessary. Basically, the case-based doorstep delivery system replaces only the logistic sequence of the customer traveling to the store to purchase the shelved item, and this portion of the distribution cycle was never palletized."
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