Is ship-from-store a proven omnichannel benefit?
Many retailers are now using their stores as fulfillment centers to ship a small portion to upwards of 20 percent of the product they sell online.
In the third quarter, Best Buy’s online sales expanded 21.6 percent, with about half of the gain attributed to the chain-wide rollout of ship-from-store capabilities in January 2014. Others are using a hub store model in each region. For instance, Walmart is using 83 Supercenters for ship-from-store and Target, 136.
Besides significantly improving inventory availability to fulfill online orders, Best Buy has said ship-from-store boosts margins because exposing clearance inventory to both retail and online customers spreads markdown risks. The need to reallocate inventories is also lessened. Finally, ship-from-store promises to speed shipments to nearby customers, a feat expected to support same-day delivery.
On the downside, several recent articles have pointed to the challenges of using store associates as pickers. Finding items is naturally harder in a store versus a row-by-row, automated warehouse, and items inside a store often get lost due to misallocation by stockers or having been moved by shoppers.
Working around shoppers to find items is also arduous. In some cases, associates get caught fulfilling orders instead of helping customers. Designated pickers also answer questions from shoppers, a mandatory delay preventing quick online order turnarounds. To address traffic distraction, Macy’s associates pull the bulk of online orders before the store opens, according to the Wall Street Journal. Retailers also need to set up sophisticated packaging and shipment departments in their stores.
Peter Sheldon, at Forrester Research, told the Pittsburgh Post-Gazette "a distribution center is still far more efficient at packing and picking, and can do it at a lower cost than a store."
Many stores are also carrying greater inventory to not only support online orders but in-store pickup. Finding storage space for the extra goods and avoiding excess inventories become challenges.
In a blog post, Jeff Ashcroft, director of business development at SCI Group, the provide of supply chain solutions, pointed to the challenges around distracted sales staffs and rising store out-of-stocks coupled with retail costing five to tens times more per square foot than warehouse space. He labeled ship-from-store "truly a flawed solution to the omni-commerce puzzle."
- Can Wal-Mart Clerks Ship as Fast as Amazon Robots? – Wall Street Journal
- Crunch Time for FedEx and UPS as Last-Minute Holiday Shipping Ramps Up – New York Times
- Stores seek edge over e-tailers with online orders – Reuters
- Optimizing Fulfillment: From Any Store to Any Customer – Apparel Magazine
- In-store pickup challenging stores to handle inventory – Reuters
- Best Buy has an edge over Amazon as stores serve as shipping hubs – CBS Marketwatch
- Store’s backroom takes on a key role in retailers’ battle with online rivals – Pittsburgh Post-Gazette
- Beware the Ship-From-Store Spin – Linkedin
Discussion Questions
Are retailers overestimating the ability of stores to efficiently pick and pack online orders? What are the obvious and less obvious challenges retailers face using stores as fulfillment centers?
Would be interesting to find out if the increase in online sales from in-store pickup impacted in-store sales.
It is necessary to be competitive so it doesn’t really matter.
Funny this appeared with the same query about retail employees getting enough respect. The old canard of doing more with less has been pushed to the limit in retail.
Two person coverage is standard in stores that used to have double or triple that when just asking them to ship from store could have been accomplished without too much work.
Adding “one more thing” dilutes any meaningful help in the brick-and-mortar locations if allowed to happen when the store is open.
A fool’s folly for a number of reasons indicated in this article to add this job duty to workers already feeling overwhelmed, isolated and disrespected.
Would love to see the shrink stats on these stores’ ship-from-store as those who feel disrespected, overwhelmed and isolated are the most likely to look the other way when customers or employees pilfer merchandise.
I’ve raised red flags about this issue several times this year, as the practice has spread. Omni-channel retailers run the risk of overburdening their brick-and-mortar locations in a few key ways:
First, is the staffing adequate to take care of customers who have actually driven to the store to buy something, on top of processing e-commerce goods? Second, are assortments on seasonal goods starting to break (as they should about a week before Christmas), making it more difficult to fulfill web orders? Finally, are the logistics of getting goods from random store locations to the customer more difficult to coordinate with the big carriers?
As the Target executive says in the Wall Street Journal article, everybody has a lot to learn this year, especially when layered on top of BOPIS initiatives and healthy store traffic to begin with.
They may or may not be overestimating their abilities but I think the question misses the point.
If store-level employees are picking and staging, who is providing service for the in-store shopper? My guess? Not enough folks.
Now if you told me that you were going to hire dedicated pickers then we would have to look at the economics of the new model and I think we can all agree they’d be somewhat lacking.
Increasing store labor against demand that can’t be forecasted is foolish.
Decreasing in-store service is foolish.
Eroding already thin margins is foolish.
So—what was the question again … ?
It depends on the retail store footprint. The larger the back room, the easier to pick.
However, I’ve been saying a couple of things for some time:
I was just imagining if cash was being introduced as a payment type. Would we be asking ourselves if we’re asking too much of stores to collect money, put purchases in bags or boxes and remove security tags too?
There is no reason to abandon ship-from-store, but there’s no reason to perpetuate forecast errors either.
Using stores to pick and pack online orders is not a good idea. It’s far more costly than shipping from a distribution center. It’s not a good use of store employees’ time. And it’s frustrating for in-store shoppers.
With consumer complaints about lack of quality customer service at all-time highs, retailers should focus on enhancing the in-store experience, rather than using sales associates to pick, pack and ship.
As an operations and business model, ship-from-store makes no sense at all. It just adds extra layers of handling and that adds up to costs. The only sense it makes is to use it to balance out-of-balance inventories that are in stores.
Efficiency comes from consolidating inventory, automated picking and bulk shipping. Ship-from-store is contrary to all these steps.
Just think about your experience of how long it often takes for a sales associate to find a product you ask for. Now compare that to the efficiency of automated picking.
Picking and packing orders has not been a competency of retail stores, but it’s early and the process can/will improve. No doubt a distribution center is better set up for this, that’s its purpose, whereas a store is meant for shoppers to pick items off the shelf, but methods will be developed to make in-store picking and packing easier and less obtrusive to customers shopping in-store. The big challenge for in-store is still knowing and making sure inventory is available to fulfill an order.
Sales associates doing “heads down” work in front of customers on the sales floor isn’t good. If I’m standing near or in front of an associate who’s obviously engaged with filling an online order they have in their hand while my presence goes unnoticed, I’m feeling a little like chopped liver. Associates, reduced to stock pickers, feel disrespected and uncomfortable under the glare of customers waiting to be served.
If I’ve taken the time to drive to the store to shop only to find sales associates engaged with non-customer facing duties, I’m going to feel disrespected, neglected and frankly a little stupid for having made the trip. I’m also going to be a little more than annoyed if while I’m waiting for attention the item I came to purchase is picked up by an associate filling an online order.
Retailers trying to kill two birds with one stone, by turning the sales floor into a fulfillment center, will diminish their in-store business and drive their customers elsewhere. And ironically, as their in-store business dies, they will blame online shopping.
While some big box retailers may be able to make this work (as they would have the location volume to dedicate in-store resources to this task), the idea that the majority of retailers could efficiently make use of in-store fulfillment of online orders is pretty far-fetched.
Training a distributed workforce, paying for additional onsite storage and the ongoing management of the exceptions (there are many more exceptions due to the relative uncertainty of inventory positions in the store environment versus the warehouse and the resulting handling of payments and credits) make this model very difficult to support.
While the idea of exposing in-store clearance inventory to online customers has its merits, the resulting operational challenges in the store environment far outweigh any advantages the retailer might gain from this practice. Add to this the cost of shipping from a store location (labor and shipping fees are typically higher than from a centralized warehouse) and you are already underwater in the comparison. Layer on the cost of maintaining branded shipping materials (the customer should never know that it came from the store instead of the warehouse) at virtually every store location in the enterprise and you have the recipe for a distributed processing nightmare.
Who is picking the orders in stores? Regular employees trained to sell items on the floor? Who is doing the job they are not doing when they are picking? Which is most important—picking orders or helping customers? Do the employees know that? Are they rewarded accordingly? Is the store measuring customer satisfaction with service or speed of picking orders? Is a dedicated staff needed for picking orders, trained to identify and compare SKU numbers? Is the demand for dedicated pickers high enough at a steady pace to justify their pay? What happens when inventory at the store is low? Who decides whether to fulfill the online order or the customer in the store? How is inventory balanced maintained across stores and distribution centers?
It is important to experiment with this process because it is the best way to identify issues and concerns that may be unanticipated. Determining success depends upon what is being measured and what goals have been established. There is definitely a difficult balancing act between efficiency of online fulfillment and customer service in the store.
Savvy retailers understand their distribution opportunities. They can see the benefit of having local distribution (in-store) versus a distribution center. In some markets it may make sense to have one over the other.
These savvy retailers also understand how to properly staff. Employees on the floor selling versus picking and packing can be determined by a smart manager.
So in the right situations, it’s smart to have the local stores picking and packing, yet there may be a tipping point where it makes sense to have the centralized distribution. I refer to these retailers as “savvy” for a reason. They are smart enough to figure out what their best option is.
This question can not be addressed properly without also asking the question, what should the store look like and act like? What experiences do we want to offer our customers and associates?
Yes, folks, it’s high time to rethink the store. How much square footage do we really need for our in-store shoppers? Do we really need to place all the merchandise on the floor? Should we be looking at a model like Hointers uses? How, where and what kind of associates will be required?
I can see a lot of pluses to using stores as fulfillment centers, but let’s do the journey mapping before we set up shop.
And that’s my 2 cents!
There are very real challenges with ship-from-store, and Jeff Ashcroft does a good job of articulating some of them. But I strongly disagree with the conclusion that those challenges mean ship-from-store is not part of the solution.
First of all, retail clerks don’t have to pick as efficiently as a fulfillment center for ship-from-store to work. Even if the picking costs in a store are $6/SKU vs. $3/SKU in a DC, if the shipping costs for that shipment are $4 from USPS vs. $11 from UPS, then ship from store is still a more cost effective solution. Walmart says it cut more than 20% of shipping costs by intelligently blending ship from store into it’s fulfillment model.
We also have the enormous advantage of ship from store packages arriving faster. Per StellaService, Best Buy went from averaging 2 days slower delivery than Amazon to being a day faster than Amazon when they added ship-from-store to their fulfillment model.
And of course, ship-from-store unlocks 100% of a retailer’s inventory, which makes it far more efficient to match supply with demand.
It’s a mistake to look at bad/early executions of any of these fulfillment models and draw global conclusions from them. Macy’s early ship from store efforts where very rough, but today the labor model has been dramatically refined and it’s now an important part of their supply chain.
At the end of the day, ship-from-store is absolutely not a magic bullet, and it’s certainly not easy, but it remains an important tool in an omni-channel retailer’s arsenal.
Most of us seem to be on the same page: it can work—or not—depending on whether or not there is sufficient in-store staffing so as not to neglect in-store customers (yes, not everyone shops online…really!). I would think those retailers who “get it (staffing) right” are the same ones who get other retail issues “right”…and those who don’t are the same underperformers who will be the subject of future RW “how can they get back on track?” articles.
Yes, retailers are forgetting to answer the fundamental question, “what business are you really in?” Retail stores lack the infrastructure, technology, processes and skills to excel at picking and shipping items to consumers efficiently. That is not to say the store cannot remodel to include a warehouse operation in the back, but a retail store is fundamentally design to service consumers who are physically present.
It will be interesting to see if the changes and improvements in inventory turn compensate for the reduced customer experience, increased labor and inefficiencies inherent in trying to do two things with a single store location.
Strategic opportunity, tactical challenges and a developing operating model. In-store picking (shopper for hire) seems like a sensible pick-up in-store option, and perhaps one for quick need items, while other retailer profiles might be better suited for centralized picking. Challenges for stores: Is the inventory count right? Dedication of resource to the task? Filling the cart or helping the customer? That and more—but the strategic value of turning up at a store and having the shopping bags filled for you? Only time will tell.
It definitely poses a major logistical challenge. It’s still fairly new and retailers are still figuring out how to do it all to serve the greatest amount of customers: BOPIS, same day delivery, and ship-from-store.
I agree with Gajendra that it would be interesting to see the correlation between online and in-store sales based on which of these tactics stores are employing.