From 2020 to 2021, sales at discount retail stores in the United States jumped from $92.11 billion to $103.4 billion, marking the first year-to-year increase since 2006. While this spike in sales is great news for discount retail brands, it comes at the same time that these companies are facing numerous other headwinds, with the rising cost of goods being the most challenging of them all.
As prices continue to soar, it has become increasingly difficult for discount retailers such as Dollar Tree, Dollar General, and FiveBelow to continue offering the discount deals that are key to their branding. While discount retailers can do little to control the prices of the products they procure, the cost of goods is not the only supply chain expense that can be lowered. By optimizing their logistics operations for efficiency and savings, discount retailers can keep their margins sustainable without having to raise the price of popular products.
In this article, we'll cover everything you need to know about discount retail logistics, including how partnering with the right 3PL can help discount retailers develop an optimized supply chain to keep freight costs low.
The Role of Freight Management in the Dollar Discount Retail Sector
Last year, Dollar Tree's management announced that they would add an additional $185 million to $200 million in freight costs to the company's 2021 profit estimates. Rising freight costs have impacted companies across all industries, but they have been especially difficult for companies in the discount retail sector; when your margins are already incredibly tight (an unavoidable consequence of selling products at deeply discounted prices), even small increases in expenses can spell disaster.
For this reason, optimized freight management is especially essential for today's discount retail brands. By improving supply chain efficiency and eliminating wasted freight expenses and fees, discount retail companies can take meaningful strides toward mitigating the pain of rising freight costs.
The Key Areas A Freight Broker Focuses On for Dollar Discount Retail Stores
At Wicker Park Logistics, we are proud to partner with numerous discount retail brands to optimize their supply chains for savings in the face of rising freight costs. The key areas that we focus on to help discount retail stores lower their transportation expense include:
Capacity Procurement
One of the biggest reasons freight costs are on the rise is that demand for transportation services continues to outpace the supply. Along with driving prices up, this imbalance has made it increasingly difficult for organizations to reliably secure capacity for their freight.
Unreliable capacity procurement can create a range of costly issues. It can also drive up freight costs directly by requiring retailers to pursue alternative modes of transport that are even more expensive. This is why capacity procurement is one of the top areas that Wicker Park Logistics focuses on helping discount retailers improve.
By leveraging cloud-based systems that display real-time carrier capacity and our diverse carrier network, we can ensure that retailers can easily procure capacity for their freight at the best possible rate.
Digitizing Processes to Eliminate Wasted Administrative Activity
Retail logistics and freight management can be incredibly time-consuming when conducted via manual methods. While it may not be the first expense that comes to mind when you think about freight costs, the number of administrative activities retailers spend managing their supply chains can often be a substantial expense.
By digitizing freight management processes and automating tedious, repetitive tasks, Wicker Park Logistics can dramatically reduce the administrative burden of freight management. Along with lowering costs, our approach to digitization and automation also helps eliminate the human errors that might lead to a long list of other issues and expenses.
Helping Optimize Inventory Upstream
When margins are already tight, the last thing that a retailer can afford is to purchase and ship far more products than it can sell. This makes effective inventory management one of the most important keys to success as a discount retailer.
At Wicker Park Logistics, we help retailers procure the right amount of inventory via advanced forecasting tools and expert supply chain analysis. This ensures that discount retailers never have to worry about popular products going out of stock while simultaneously helping them avoid the numerous expenses associated with excess inventory.
Conclusion
Discount retailers are facing serious headwinds in the form of rising freight costs, but the recent growth in discount retail sales shows that there is still an opportunity to be seized. Going forward, the discount retailers who can keep their prices low by reducing freight costs will be the ones best positioned to succeed.
As the industry's leading 3PL for discount retail brands, Wicker Park Logistics offers the tools, partnerships, and expertise that discount retailers need to optimize their supply chains for maximum efficiency and cost-effectiveness. If you want to learn more about the many advantages of partnering with Wicker Park Logistics, contact us today!
