How Adding Ship-from-Store to an Omni-channel Strategy Changes the Retail Network

Omni-channel retailers today require agility in order to compete and thrive. When it comes to adapting the retail network for an omni-channel approach, a focus on the customer is essential. Integrating a ship-from-store strategy can enhance customer service and serve as an important competitive differentiator. The challenge is determining if and when a ship-from-store strategy makes sense and how to best enable this fulfillment option without impacting store productivity and service.

Ship from store has gained traction based on changing shopper expectations and buying trends.

Customers have a new viewpoint on shopping. For the most part, shoppers are no longer dropping by stores without an idea of what they want to buy and how much they are willing to spend in mind. Shopping now begins before consumers even enter a store. For example, shoppers will investigate styles and options online before heading to a brick-and-mortar store.

Previously, waiting two to three weeks for an online or catalogue order was commonplace, but that is no longer the case. Shoppers expect to receive purchases within days – if not hours. In addition, shoppers expect retailers to have products they want when it comes to brand, size, style and color. If the item is not available in the brick-and-mortar store where they are shopping, they expect to receive it from another store or facility within the retailer’s network at no additional cost to them.

Ship-from-store can provide high levels of customer value by delivering a wide range of products quickly and at lower cost than traditional e-commerce. In some cases, it also provides a chance to save the sale and the valuable opportunity for store associates to make additional sales once a customer is physically in the store.

Additionally, ship-from-store improves margins by providing demand to slow moving inventory trapped at a store. At the end of any season, product becomes scarce in a retailer’s network. That is by design as room is made for the new season’s product. There are always still customers for old season product, and markdowns are made to entice the buyer. Since there are fewer buyers, it sometimes takes more of a markdown in a particular geography to entice the buyer to purchase. Utilizing store inventory to ship e-commerce orders enables the last remaining units for the entire country. Depending on the margin of the product to begin with, this can increase revenue and margin on the sell.

How does implementing a ship-from-store strategy impact the supply chain network?

In order to accommodate a retailer’s number one priority – the customer – businesses must adapt their retail network strategies. The retail network strategy should encompass all aspects of supply chain for retailers from number of warehouses, to shipping and fulfillment strategy, to deciding where customers can return items. For many retailers, the retail network strategy will include the addition of the ability to ship products from stores. Adding this capability will provide many benefits including increased customer convenience and accelerated order processing. In a time when even small retailers are competing with companies such as Amazon, the ability to ship from store can be a differentiator, enabling new points of distribution without the cost of adding a new distribution center (DC). While there are challenges, they are surmountable if retailers assess and plan for potentially drastic changes in three primary areas. These include:

  • Inventory: Inventory visibility is key to keeping customers happy because retailers need to have the right products, in the right locations, at the right time. If not, customer service is negatively impacted. Whether it is inventory from a direct vendor, from a store or a DC, retailers should know what they have and where at all times. Gone are the days of 60 – 70 percent inventory accuracy being sufficient in a store at the SKU level. Better inventory visibility will ensure that ship-from-store is possible and profitable.
  • Transportation: Increased transportation costs can be of concern for retailers employing ship-from-store. This is because retailers are now shipping product from multiple locations and are sometimes splitting orders, meaning a single order might incur multiple shipping fees. Retailers need to consider if the customer service enhancement that order splitting can achieve by getting products to consumers faster is worth the potential added cost of transportation. The answer is likely dependent on the type and size of products. Retailers can also consider utilizing delivery services rather than traditional shipping in order to save on transportation costs. Re-evaluating existing transportation plans will be key to ensuring transportation costs aren’t negatively impacted by omni-channel. Conversely, because products should have a shorter distance to travel before reaching their destination, transportation costs should be reduced in most cases.
  • Labor: Ship-from-store will substantially impact in-store associates. Retailers need to determine how much extra work it will cause for associates. There may be times of year (e.g., holiday peak season), or times of day or week (e.g., weekends), or certain facilities with high amounts of foot traffic where ship-from-store will not make sense or where additional headcount may be required. Whether additional staff is needed or not, all associates will need to be trained on fulfillment processes and be instructed to focus on in-store shoppers as the first priority. The same types of concepts from preferred work methods and reasonable expectancies to complete orders will be important in the store as it adopts as a fulfillment point.

There are other considerations retailers will need to contemplate when developing and implementing a retail network strategy that is omni-channel-friendly beyond ship-from-store. For example, determining what packaging and shipping materials need to be housed in each store or distribution center, assessing future inventory allocation to stores, and deciding how to track the revenue from different channels (for example, will an online purchase fulfilled in-store tally toward the company’s overall online or in-store sales). When developing omni-channel fulfillment strategies as a whole, it may be helpful to work with outside assistance to ensure every piece of the puzzle is accounted for and addressed.

Summary

Supply chain strategies all come down to basically a balance of service and cost. Depending on the goals of the organization and margin in the product, that line can tip one way or another. Fulfillment from a store is just another node in that equation. The key is lining the organizational goals specifically around the balance between cost and service.

When developing omni-channel fulfillment strategies that involve ship-from-store, it can be helpful to think of the end goal as providing a strategy that is channel-less. Look to adopt strategies that embrace online, catalogue and in-store shoppers as one. After all, at the end of the day, it is all about providing optimal service to the customer, no matter how, when or where they are shopping. The customers that view the retailer as channel-less are the ones who will be the most engaged. The most engaged customers will be most loyal and ultimately will enjoy their shopping experience the most. Become their default brand to shop. That is the ultimate goal.

davison-schopmeyerDavison Schopmeyer is a managing partner of enVista, a leading global supply chain consulting and IT services firm, delivering innovative solutions that improve profitability, enhance customer service and reduce waste from source to consumption. enVista’s unrivaled consulting experience, deep vertical industry expertise and comprehensive solutions portfolio enable clients to leverage one strategic partner that consults, implements and operates across supply chain, transportation, retail, IT and ERP.

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