Jim Hendrickson, vice president, logistics solutions at Pitney Bowes, discusses the trend toward ship from store as a result of an ongoing shift in shopping habits and e-commerce activity.
While centralized, high-volume distribution centers for the shipping of consumer goods has made economic sense for decades, the ongoing shift in shopping habits resulting from e-commerce has disrupted this shipping model. As retailers look for ways to manage efficiencies, there is a trend emerging where web orders are shipped from local stores in addition to distribution centers. Using this approach rather than the traditional model has the potential for retailers to reduce costs, satisfy customers and grow same-store sales.
Competition is fierce and retailers are looking to attract and retain customers whenever and however possible. As a result, they tend to take an omni-channel approach to viewing their customers, which at its essence means they provide a seamless approach to the customer experience through all available shopping channels whether they are shopping via mobile devices, computers, bricks-and-mortar, or catalogue. While the ability to shop in so many ways is attractive to customers, it does add a layer of complexity to the retailer.
For example, while e-commerce has the potential to grow a company’s overall sales and increase total revenue, it will often mean reduced in-store sales as well. With e-commerce based orders increasing and same-store sales decreasing, order fulfillment becomes a key concern. Questions emerge such as should retailers consequently reduce their local presence and how does a centralized distribution model fit this new business reality?
Providing balance between the need for efficiency with the need to keep the brand local, a ship-from-store approach provides retailers with the best of both worlds. Local orders can be shipped from the local storefront while orders from farther distances can be fulfilled through the central distribution centers. In fact, stores with lower sales can become “zone fulfillment centers” to increase their productivity and overall value to the organization.
Critical for success are retail associates as they are the ones who ultimately need to manage the in-store fulfillment responsibilities, in addition to the in-store role they have always played. From picking the products to packing and managing shipments from the store to customers, virtual customers need to be given equal footing with in-store customers resulting in a critical balancing act amongst employees and all customers.
Challenges associated with the ship-to-store approach are two-fold:
i. How to route orders to stores that can fulfill orders from existing stock
ii. How to create a multi-carrier shipping process from both the distribution center and the local store
In both cases, technology plays a pivotal role when it comes to routing orders regardless of how the product was ordered and where it’s to be shipped from. Distributed Order Management Software provides the retailer with the ability to route orders to any channel for fulfillment. Less established but growing, Distributed Parcel Management solutions support multi-carrier parcel shipping from both the distribution center and the local store.
For carriers and other logistics companies, this creates a new opportunity or a disruption. There is no sense, today, that retailers moving to ship from store are going to close warehouses or other distribution centers. The strategy is about better labour and retail asset usage along with shipping cost management rather than a fundamentally new business model. That said, this model will inevitably change elements of the vertical logistics supply chain as advanced concepts, like same day delivery, increased focus on cross border shipping, and cross-store stock management become more common. Retailers will be looking for new services, advice and counsel on how to optimize and manage their environments. Logistics companies that step up to fill this gap will find themselves in a deeper, more “sticky” relationship with their clients.
As retailers continue to innovate and improve on the overall customer experience, how they cater to shoppers will continue to change. Ship from store is but a first step of many. Already, “intelligent lockers” exist. Merely physical storage locations outside of a store, they provide a place for people to pick up orders outside of regular business hours upon receipt of a unique code emailed or texted to them. In addition, global becomes local when international orders can be serviced by domestic storefronts. Logistics companies may find new extensions to their services by managing back office warehouse locations and providing new kinds of delivery services from these store locations.
Ultimately, new innovations in the fulfillment and delivery of orders will be driven by customer demand for choice and flexibility in how they order and receive products. Retailers and logistics companies who focus their strategy on better labour and retail asset usage along with shipping cost management will find themselves well positioned for the future.