Even before the COVID-19 pandemic, the gradual rise of eCommerce and the “Amazon effect” began to transform customer expectations surrounding the speed and convenience of retail. But the pandemic accelerated this shift, and despite customers returning to brick-and-mortar stores in recent months, online penetration in the retail market is still 30 percent higher than pre-COVID.
One of the most pressing challenges for retailers right now is to meet consumers’ heightened expectations around delivery speed. With 46 percent of shoppers abandoning shopping carts as a result of “shipping times that were too long or not provided,” accelerating the end-to-end click-to-ship process is mission-critical for brands hoping to stay competitive today.
Most order fulfillment operations require significant time to pick and pack deliveries. Achieving one- or even two-day shipping requires tight cycle times and precise execution across multiple parties in the supply chain.
However, US consumers largely remain unwilling to pay for speed. Recent research from McKinsey found that only one in five US consumers will pay a marginal increase in fees for faster shipping as compared to standard free-delivery options. To combat these challenges, many omnichannel retailers are using in-store fulfillment software to manage order fulfillment directly from the store, as a way to improve delivery speeds and profitability.
The Why: In Store Fulfillment Software Enables Lightning-Fast Delivery
The distinction between two-day delivery and next-day delivery might seem small from an outside perspective, but the differences in cost and required logistical capabilities are massive. A recent study from McKinsey estimates that merchants can offer two-day delivery to 80% of the U.S population with only 3 distribution centers. However, offering next-day delivery would require more than 8 distribution centers.
Unfortunately, opening an at-scale distribution center can cost brands more than $100 million, making true scalability and widespread next-day delivery unfeasible for many retailers.
To combat this challenge and contend with players like Amazon or Walmart, urban- or market-fulfillment strategies have become increasingly popular. These typically consist of smaller operations and stores, sometimes called “dark stores,” with far less overhead - a capital cost that is a fraction of the cost of opening a new at-scale distribution center. Harnessing store locations as micro fulfillment centers and investing in in-store fulfillment software helps smaller retail brands achieve best-in-class customer service and lightning-fast delivery times within their omnichannel strategy.
Using store fulfillment offers a wide range of benefits, including:
- Greater overall inventory productivity
- Faster delivery times to customers
- Fewer markdowns
Read on to discover our expert tips for how retailers can maximize the impact of their in store fulfillment software and strategy.
The How: Three Strategies For Approaching Store Fulfillment the Right Way
With online and offline channels increasingly working in tandem throughout the buyer’s journey, physical stores have an important role to play in a brand’s omnichannel strategy. Today, retailers must decide if they should keep their stores’ current layout, transform them into so-called “dark stores” designed solely for distribution purposes, or opt for a combination of the two.
Making this decision is no small endeavor, because there is a broad range of questions that brands need to consider. We’ve outlined some key dimensions to consider when deciding which approach to store fulfillment will be most suitable for your needs and how to tailor your in store fulfillment software to align with your strategy.
Products’ physical attributes: The physical properties of the items being sold (i.e. size and weight) are an important consideration when deciding the optimal store fulfillment strategy. The store infrastructure must be able to accommodate the necessary order preparation logistics for the average-sized order.
In-Store shopping experience: Keep the in-store customer experience top of mind as you transform your stores into micro-fulfillment centers. In general, you don’t want your customers to feel like they’re walking into a warehouse when they arrive at your store. To avoid this, try:
- Picking orders outside of opening hours or during low traffic periods
- Sending orders to store locations with lower in-person sales or larger backrooms
Target last-mile delivery speed: Customer expectations of delivery times vary by location and proximity to store locations. Understand your target speed in unique regions to select the most effective store layout to meet your delivery speed goals.
Local and competitive store density: In densely populated areas with multiple store locations, there are serious advantages to transforming one store fully into a “dark store” designed to fulfill online orders. Brands should also research the density of the competitor store ecosystems to understand the competitive environment and prevent customer churn.
Store amenities: Assess the current amenities of each store location in your network, from the square footage to the layout to the physical fixtures.
Integrated tech stack and inventory accuracy: In order to have omnichannel store locations that deliver on both walk-in and online orders, your stores must be equipped with real-time, accurate inventory visibility to avoid overpromising or selling the same product twice. Daily stock updates are not enough for omnichannel locations that are accessing the same stock across multiple channels.
Online assortment size: The optimal store layout also depends on the online assortment size. In general, a large assortment size can pose greater logistical challenges. This trade-off is a key consideration for retailers deciding whether to opt for a more traditional store layout or a “dark store” layout.
Costs vs. delivery speed: Another key trade-off to consider when exploring in store fulfillment software is that of increased order fulfillment cost vs. increased delivery speeds. In-store fulfillment is more expensive than orders fulfilled from warehouses because store associates spend more time and resources picking and packing these orders. Conversely, returning orders in-store is far less expensive than returning orders by mail. Thus, it’s important to look at cost and time savings holistically when evaluating the end-to-end network. Even though rent and labor costs are higher for these store locations, the increase in cost is often offset by the substantial reduction of last-mile delivery costs (up to 20%).
Employee training: A store fulfillment strategy is doomed to fail without adequately trained and motivated store associates. Consider your current store staff and their capabilities when deciding how to most effectively transform your physical stores.
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In store fulfillment software is a must-have for retailers hoping to beat the Amazon effect. The store fulfillment strategy is a great opportunity for retailers to improve their delivery speed while cutting internal costs. It also allows merchants to offer free same-day or next-day delivery for a fraction of the resources required to achieve this through large-scale fulfillment centers. Given these immense benefits, omnichannel retailers today should have a successful Ship From Store initiative at the top of their to-do list.
To get the most out of your in store fulfillment software and strategy, retailers must welcome structural and cultural change within their organization. Achieving omnichannel success requires a lot more than an upgrade of the IT tech stack or fulfillment networks – brands need to be ready to take on a fundamentally different mindset and rework their business model for an exceptional store fulfillment strategy. Request a consultation with the HotWax team to learn more about how we’ve helped countless retailers achieve a seamless omnichannel journey for their customers.