When it comes to retail and supply chain, omni-channel continues to be one of the most talked about topics wherever you look. Omni-channel extends through all phases of the customer journey – before, during, and after the sale – and has an impact on nearly every software application you can think of. Historically, the brick and mortar store has been seen as the weak link in omni-channel operations, due to a lack of inventory visibility and availability combined with store associates that have not been properly trained. As omni-channel has evolved, companies are putting more effort into making the store a vital component of the omni-channel experience.
I recently completed an updated survey to build on ARC’s annual Omni-Channel Fulfillment strategic report. Every year the survey takes on a different twist; while the base questions are the same to look at the larger trends, I take a deeper dive into a specific topic each year. This year’s survey is focused on the store’s role in omni-channel. Once again, I partnered with the folks over at DC Velocity to create and distribute the survey. The survey examined the overall fulfillment process, starting with channels of operation, warehouse logistics, fulfillment technologies, last mile options, and finally, store operations and its changing role. The new report will be released in the next month or so, and DC velocity will run their feature article as well. For now, however, I’d like to share a quick sneak peek on the status of the store in omni-channel operations.
How Orders are Fulfilled from the Store
According to survey data, there are three main ways that stores handle fulfillment of e-commerce orders. The most popular method, as selected by 94 percent of respondents, is to pick orders in the store and ship them to the customer. Compared to last year’s survey, when nearly 70 percent of respondents identified pick and ship from the store, this is becoming a bigger part of store operations. I’ll examine why this is becoming more popular later in this post. The second leading store fulfillment method is the traditional method of picking orders and holding them for customers. The driver here is to get the customer in the store; however, with more customers preferring not to step foot in stores, more e-commerce orders are being sent to the store for shipping. The third method is ship the item from a DC to the store for customer pick-up. This is generally done when the customer wants to pick up the item in the store, but that specific store does not have it in stock.
When to Fulfill from the Store
As mentioned above, store fulfillment is becoming a bigger part of the e-commerce landscape. When it comes to delivering items from the store, we asked survey respondents for the key criteria they use to determine when to fulfill e-commerce orders from the store. The number one criteria is inventory constraints / stock-outs at the local DC (63 percent). In this case, the DC is unable to ship the item because the item is out of stock, so it enlists a local store that has the inventory in stock to pick, pack, and ship it. There are also times when the inventory levels are very low at a DC but a store may have an overstock situation. This allows the store to reduce its inventory without fears of having to markdown the item at a later date. The number two criteria for store fulfillment is the distance to the customer delivery location. If a store with adequate stock is significantly closer than a DC, it will be faster and cheaper for the retailer to ship the item from the store.
Survey respondents also indicated that they frequently use stores for e-commerce picking, packing, and shipping when DCs are unable to meet overall order volumes. In this case, when the DC is flooded with orders and will not be able to meet delivery timeframes, it will expediate the order to a local store to make sure the customer gets the order when they expect it. This also applies to rush orders, where it will be cheaper to use a store that is located closer.
Delivery Timeframes from the Store
There has been a greater emphasis placed on free, fast delivery over the last few years. So how does store delivery fit into this? I asked survey respondents what the quickest guaranteed delivery timeframe they offered. The key here is guaranteed; the store might be able to get the item delivered faster than the guarantee. The most popular timeframe, identified by 39 percent of respondents, was next day. The second most popular timeframe was more than two days (22 percent), followed by 90 minutes (17 percent); additionally, 11 percent indicated they guaranteed same-day delivery. Given that there were multiple timeframes within one-day delivery (90 minutes, 2 hours, 4 hours, same-day), the total for same-day delivery was 39 percent.
The final piece of the store fulfillment puzzle is the internal capabilities that stores have. Not surprisingly, the most important capability identified by respondents was visibility of inventory across all locations. This information is a vital component to the omni-channel experience. It enables the retailer to look at DCs and stores and identify the most cost-efficient option while maintaining a high level of customer service. The use of a distributed order management system is the key piece of technology required here.
The next two most important capabilities both relate to store staff. Ease of use for store staff was identified by 53 percent of respondents, and 42 percent identified proper training of store staff to pick, pack, and ship. Whether it is shipping or in-store pick-up, the process has to be easy for store staff. This means making sure that fulfilling an order will not derail them from their other tasks for too long or cause any confusion on what their duties are. Training is a big part of this, as the skills required for floor staff and warehouse staff are significantly different. Training store associates on how to properly pick, pack, and ship speeds up the process while helping to eliminate errors or damaged merchandise.
That’s all for the sneak peek. The full report will be out in the next month or so.