Clicks and Mortar: Succeeding at Store FulfillmentNovember 7, 2016
While we all recognize that today’s consumers are driven by “Instant Gratification”, many retailers are still struggling to capitalize on the advantages that having physical stores provides over their pure-play e-commerce counterparts.
Beyond simply engaging consumers in feeling product or experiencing the brand, stores also provide retailers with an opportunity to build and strengthen customer relationships, and most importantly to sell more products and services. Furthermore, the potential cost savings and synergies to be gained by leveraging a physical store network to fulfill orders can be significant.
How can retailers capitalize on their biggest asset and drive customers back into the store? It starts with Store Fulfillment, and a retailer’s ability to successfully leverage the following key areas:
- Master the Art of Inventory Visibility
Retail today requires better integration between physical stores and the e-commerce channel. Consumers expect to have visibility into product availability regardless of which channel they’re shopping. However many retailers are still playing catch-up to meet expectations. A recent omni-channel study from MasterCard found inventory availability to be the number one frustration of consumers. Yet HRC found that that more than half (52 percent) of retailers still do not have the systems in place to provide accurate visibility into inventory on-hand in each store.
- Leverage Local Assets
A store network offers fulfillment options that have advantages for both consumers and the retailer. For example with in store pick up consumers can often get their order the same day, and retailers gain an opportunity to sell-add on products or services. The ability to ship a customer’s order from a local store is likely to be both faster and cheaper than shipping from a more distant distribution center, which could lead some retailers to meet or beat services such as Amazon Prime on cost-effectiveness. Further, there are also advantages to opening up inventory across all locations to be leveraged to fulfill consumer demand such as minimizing “stranded” inventory, avoiding expensive transfer costs and improving margins through reduced markdowns.
- Tackle “True” Fulfillment Costs
Despite advancements in technology, less than 1 in 5 retailers currently fulfill omni-channel demand profitably according to a study by a “leading application provider”. Sixty-seven percent of retailers report that while volume grows costs are also increasing. What are the key contributors to the escalating costs?
Labor: As volume increases, orders that used to be filled by a sales associate during the store’s “slow time” may now require additional staff. The store level costs associated with order picking and processing costs need to be tracked.
Shipping: Freight costs can vary widely based on the shipping zone and those costs need to be accounted for in the business rules and logic used to route orders. Only half of the retailers HRC surveyed indicated that they are able to ensure fulfillment occurs from the closest location.
Returns: The vast majority of retailers surveyed by HRC (95%) said that their biggest challenge to transforming the supply chain was figuring out how to mitigate online returns – which can run as high as 30 percent. While 85 percent of retailers noted the high cost of online returns to a store, even returns to a fulfillment center incur incremental freight costs, risk of product damage, and the lost opportunity for a replacement sale in-store.
- Seize the Day – and Serve, Serve, Serve!
Physical stores allow retailers to capture engaged consumers and serve their needs and preferences in a variety of ways. Need a replacement cord for your laptop? A customer can first check online to see if it is in stock, place an order and simply pick it up at the store. Grocery stores in many markets are rolling out curb-side pick-up that enables customers to order online and have their order ready to be loaded when they pull up. A store runs out a certain shirt in one store, but may have it available in another location nearby. The customer decides whether they want to pick it up, have it shipped to the current store, or sent directly to their home.
By implementing these 4 key practices retailers can thoughtfully integrate their physical stores and direct commerce channels to profitably deliver a superior consumer experience. Leveraging the unique strengths of all channels will not only serve to enhance a retailer’s brand, but increase profits.