In today’s complex, multi-channel landscape, many retailers are looking for a competitive edge to cut costs and improve sales.
Companies are turning to in-store fulfillment or ship-from-store strategies to increase revenue and margins by better leveraging the inventory in their stores; however, there are challenges and impacts to business functions and staff when implementing this kind of fulfillment model.
Ship-from-store is more than just shipping products directly from your brick-and-mortar store. There’s a huge amount of work and complexity involved. Retailers must weigh the pros and cons of in-store fulfillment to see if this initiative can truly benefit their business.
Why Implement a Ship-from-Store Fulfillment Strategy?
Department stores such as Macy’s, Nordstrom and Toys “R” Us are abandoning distribution centers in favor of implementing ship-from-store distribution. Macy’s CEO has said “We’re no longer going to need fulfillment centers anymore. We’ve got 800 of them, and they’re called Macy’s stores.”
At a macro level, the ship-from-store model is about connecting consumer demand with inventory in the most flexible and cost-effective way. It allows merchandise to flow seamlessly between stores, warehouses and customer homes.
As a result, retailers can drive sales and reduce markdowns by optimizing their entire inventory and creating demand for slow-moving products otherwise trapped in retail stores.
In-store fulfillment also reduces costs and mitigates risks associated with distribution centers. Retail stores can absorb excess volume during peak times. In addition, turning stores into distribution nodes allows for faster delivery times when shipping is closer to the customer’s address, thus improving customer satisfaction.
While these benefits are real, the ship-from-store model requires a holistic approach in all business functions, as well as greater investments in IT systems. Retailers must consider many factors before enacting a ship-from-store strategy.
1. Is Your Backroom Optimized for Fulfillment?
One major consideration in in-store fulfillment is the amount of space your store can hold. Department stores and big box retailers have the advantage of having larger backrooms than smaller stores.
Retailers need to figure out if their backrooms have the proper layout and amount of space necessary to pick, pack and ship orders. Retailers must also be careful to have enough inventory in-store, in order to avoid out-of-stock merchandise on the selling floor.
2. Labor Costs and Impact on Store Associates
The ship-from-store model involves training in-store associates on fulfillment processes. Additional staff may be needed to handle in-store fulfillment.
According to retail consultancy O Alliance, using the brick-and-mortar store as a fulfillment center is causing customer service challenges and pushbacks from store associates. In-store staff feel that they lose productive hours and commissions doing online fulfillment in stores.
Today’s customers are expecting an omni-channel experience, but most retailers fail to incentivize and compensate in-store staff being tasked to support online sales, in addition to their main responsibilities of serving and engaging with in-store clients. Aside from financial labor costs, morale in the retail store can suffer when associates feel bitter about acting as warehouse personnel.
3. Redefining the Roles of Sales Associates
Much of the pushback comes from commission-based associates who often feel that they’re losing the opportunity to sell the best inventory if they fulfill online orders. In fact, some associates would hold back bestsellers rather than fulfill ecommerce orders to ensure that the items are available for their clients in-store.
A sales associate who spends more time packaging orders rather than helping customers in-store is not good for the associate nor the store’s reputation. Associates could lose a lot of commission especially during the busy holiday season when both online sales and in-store traffic spike.
O Alliance recommends that retailers allocate headcount for in-store staff specifically hired and trained for shipping. Their performance should be measured differently than that of commission-based associates. This allows for a higher degree of control, quality and accountability. If a retailer decides that they cannot afford a dedicated fulfillment staff, managers could offer a pick-and-pack incentive or commissions for online orders to ensure buy in from existing sales associates.
4. Shipping and Packaging Considerations
Distribution centers have the advantage of having a streamlined process of picking, packing and shipping. Since consistent packaging and labeling are important to the customer experience, items that are shipped from a store should be packaged as professionally as those that are shipped from a distribution center.
According to O Alliance, store associates often send out poorly wrapped and packaged items. This can be due to a lack of training, but it’s possible that many of these associates do not see their primary work duty as a warehouse associate. For stores shipping internationally, store associates must also be able to handle customs paperwork and special packaging.
Retailers must also consider the possibility of increased shipping and transportation costs. Since distribution centers often receive high volume discounts from carriers, retailers may have to shell out additional costs when shipping from multiple stores and locations.
5. How to Handle Returns in an Omni-Channel Landscape
Return policies are very important to customers. Most consumers expect free and easy returns, and if they do not like your return policy, they may choose not to shop with you again.
The ship-from-store model further exacerbates the already complicated realm of cross-channel returns. Retailers will have to determine whether items fulfilled in stores should be returned to stores or distribution centers. Similarly, they need to set clear policies whether to accept those returns by mail only, or in person at the stores. Omni-channel returns could result in poor inventory tracking and more work for your store associates.
6. Do You Have the Right Systems in Place for Complete Order and Inventory Visibility?
The ship-from-store model is built on the foundation of complete inventory visibility. Retailers need to have the right products in the right locations at the right time. Companies looking to adopt a ship-from-store strategy will need a solid inventory management system capable of tracking and optimizing inventory and demand in real-time.
To execute in-store fulfillment effectively, retailers need the ability and technology to leverage inventory against demand at precise moments, in addition to reallocating that inventory at any point based on fluctuations occurring across all channels.
As a retailer, you should carefully consider the costs and benefits of in-store fulfillment. Evaluate your current distribution operations, IT capabilities and the culture of your brand to see if ship-from-store is right for your business.
Ready to implement your in-store fulfillment strategy? Jazva can help!