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Joining many other chains leaning into the omnichannel benefits of in-store inventory, Ulta expanded ship-from-store capabilities to another 276 stores in the second quarter to reach 400.
Ulta said that between BOPIS, same-day delivery, and ship-from-store, 39% of digital orders were fulfilled by stores in the second quarter.
Scott Settersten, Ulta’s CFO, said on the company’s second-quarter analyst call that the beauty chain has been able to improve fixed store cost leverage “far and above what we were looking at pre-pandemic” by adding capabilities such as ship-from-store and BOPIS while speeding online orders to customers.
Another believer in ship-from-store is Walmart, which now fulfills half of its online orders through stores with pickup points and store-fulfilled online delivery, John David Rainey, Walmart’s CFO, recently told Fortune. Beyond convenience for the customer, Rainey said that in-store fulfillment is “also good for us because the most expensive part of delivery in e-commerce is the last mile. We’re able to reduce the amount of mileage that we have to travel.”
In 2018, Zara began fulfilling some online orders from stores to overcome out-of-stock items at warehouses. Additionally, at Target, more than 95% of all sales, including digital, are fulfilled by store inventory. With in-store and drive-up pickup expanding, Target’s average fulfillment cost per unit has come down 40% over the past four years despite same-day services growing to account for over half of digital sales.
Brian Cornell, Target’s CEO, said on the retailer’s fourth-quarter analyst call, “Turning stores into fulfillment hubs was and still is the most efficient and least costly way to grow omnichannel sales.”
Some retailers have established dedicated fulfillment areas within their stores to optimize the process.
Target and Costco are testing larger-format stores with more e-commerce fulfillment space. Prior to the 2022 holiday season, Macy's converted 35 stores into mini fulfillment centers, creating about 1 million square feet of space to handle online orders in order to lower costs, speed up delivery times, and reduce the incidence of split shipments.
Still, online fulfillment from store inventory risks impairing the in-store shopping experience. Complaints about pickers clogging aisles have been heard at grocery stores.
A recent Wall Street Journal article also notes that locating items is often easier in a warehouse than “finding goods in stores where customers may pick up items and then drop them randomly around the aisles.”
On Nordstrom’s third-quarter conference call last November, CEO Erik Nordstrom said Nordstrom Rack stopped using in-store inventory to fulfill online orders largely because the concept’s “treasure hunt environment” made it hard for associates to find items.