Using stores for order fulfillment: Optimizing inventory across the retail spectrum
More and more fashion retailers are embracing the ship-from-store model as a slam dunk strategy to streamline their omnichannel retail environment. Major labels like Urban Outfitters, Nordstrom, Saks, Ann Taylor, Macy’s, Peter Glenn Ski and Sport, and Gap have jumped on the store -as-fulfillment-center distribution bandwagon and reaping benefits. By adopting ship-from-store, these retailers have jet-propelled the delivery mechanism and are enjoying fat margins on items that sit idle in physical stores. So, what is ship-from-store? Is it the most recent epiphany in the retail world? Not actually. It is the enhanced version of the previously known strategy, buy-online, pick-up-in-store. Fulfill-from-the-store is the practice of sourcing online orders entirely or partly from the inventory of brick-and-mortar stores. Thus, the stores get transformed into a distribution node.
An array of reasons is aiding fulfill-from-the-store concept gain ground. It is beyond the bounds of possibility for a fashion retailer to predict the exact demand at a particular point of time. As a result inventory stacks up at wrong locations and the consumers can’t get what they want. Ship-from-store bridges this unhealthy gap. Nikki Baird, managing partner with RSR Research, opines that fulfill-from-the-store is operated transparently from the consumer’s viewpoint and helps the retailer to manage their assortment across the chain most efficiently. The outcome is more control, and a higher proficiency to catch and reply to demand.
With ship-from-store the retailers get enough muscle to compete with pure-play e-tailing giants like Amazon and eBay because delivery time is curtailed to a large extent. Merchandise can smoothly travel among all the destination points thereby pushing inventory visibility to the maximum level. Retailers can decide beforehand from where to pull products for online fulfillment. Pulling from a store where products are selling at a slower pace is the key. This will boost gross margin by arresting the retailer from marking-down the slow moving items. Capital expenditure reduction is an obvious advantage of the concept. As web orders are fulfilled from stores there is no need to build new distribution centers.
Peter Glenn which sells ski and snowboarding gear capitalizes heavily on the ship-from-store option and fulfills 10-40% of ecommerce orders from its in-store inventory. Use of ship-from-store facilitates Peter Glenn to test the waters for any new product or brand. In its latest drive to amplify ship-from-store Macy’s, a premium apparel retailer, has planned to increase ecommerce fulfillment from 292 to 500 stores by the end of the current year. In case of Saks, the implementation of in-store fulfillment has provided its consumers greater power of selection and peace of mind. By putting in place ship-from-store, another big league fashion retailer Urban Outfitters has markedly lowered the risk of markdown exposure.
Ship-from-store with all its bells and whistles may seem a panacea strategy for retailers. But in reality it has its inherent issues. Overwhelming attention to online orders may result in the depletion of in-store inventory. In that scenario the shopping experience of the retail customers is affected. But with effective analytics and clear picture of stocks at different locations, this challenge can be overcome.
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