Businesses and brands across the globe are scrambling to respond to the so-called “Amazon Effect”, whereby consumers now expect deliveries within two days of placing their orders. Amazon Prime in particular aims to maximize customer satisfaction and convenience by offering one-day, same-day, and even 2-hour delivery.
Many big-box retailers, like Walmart and Target, have followed suit, starting to ship from store leveraging their extensive brick-and-mortar store networks to fulfill online orders within a shrinking delivery window. But customers aren’t just expecting this lightning-fast service from the big players in the retail industry. Brands of all sizes have begun offering fast and free delivery options in order to increase purchase rates for online shoppers and reduce shipping costs.
Many retailers are struggling to keep up with rising customer expectations because warehouse-only fulfillment is extremely expensive and time-consuming. Most brands, spare the big-box retailers, have a limited number of warehouses (generally 2-4), so promising fast and free delivery across the United States, not to mention the globe, is simply unfeasible.
As a result, retailers must bear the shipping cost or subsidize it, badly hurting their profit margins despite an otherwise lean profit & loss statement. In order to successfully offer same or one-day delivery and keep up with the competition, it is clear that retailers must leverage ship-from-store to increase inventory turnover and minimize fulfillment and shipping costs. This is particularly true in light of the ongoing COVID-19 pandemic.
Companies like Designer Brands and Levi’s have ramped up ship-from-store throughout the pandemic to move inventory trapped in-store and hedge against uncertainties in local and federal regulations. According to DSW CEO Roger Rawlins, “the investments [DSW] has made over the last four, five, six, seven years to develop omnichannel capabilities, those things are going to pay back in a huge way right now, because while we are shutting the stores down to the consumer walking in day in and day out shopping, we are going to keep them up and operating as fulfillment centers, so leveraging them as a huge asset, because we are within 20 minutes to 70% of the U.S. population."
In this blog, we will discuss the 4 steps retailers must take to successfully execute a ship-from-store strategy that both meets customer’s delivery expectations and maximizes overall business productivity and profitability.
Step 1: Align Cross-Functional Teams on a Common Process
One of the most common problems with many retailers’ ship-from-store strategy is the misalignment between digital and retail store teams. Traditionally, these teams have operated as separate business units, an antiquated approach that will undoubtedly hinder the delivery of any omnichannel experience. The most successful retailers restructure their organizations to eliminate or bridge channel silos and unify all staff members around the customer, which often requires merging departments and creating cross-functional teams that include store operations, business technology, merchandising, marketing, and finance representatives working together to define new in-store operational processes.
Most stores have never performed fulfillment operations, so associates are not trained to pick, pack, and ship orders. This lack of training is one of the primary failure points when it comes to leveraging in-store inventory to fulfill online orders, which underscores the importance of defining new roles and responsibilities to support ship-from-store. This will include training store associates on omnichannel processes and technologies, as well as defining new incentives for store associates, generally in the form of commissions for online orders fulfilled from the store. Your store associates will not be motivated to participate in your ship-from-store initiative if these efforts simply take away from their ability to engage with clients and earn a commission.
As a result, it’s important for your cross-functional teams to develop a monetary incentive framework for store associates to ensure the success of your program.
Furthermore, before you launch a ship-from-store initiative, take the time to re-think the space in your brick-and-mortar locations. Your stockroom can be repurposed into a mini-warehouse, where store associates pack orders and generate shipping labels. When scouting new brick-and-mortar locations moving forward, it’s important to ensure there is adequate space for these omnichannel operations.
Step 2: Identify Technology Gaps
Identifying and addressing the technology gap that is currently prohibiting you from offering quick and cheap delivery is a critical part of your store fulfillment initiative. Retailers need a system that can receive online orders and route them to the store closest to the customer’s shipping address. In order for this to be possible, the system must have access to stores’ real-time inventory availability and all stores must have the software in place to pick, pack, and ship online orders.
Unfortunately, traditional digital commerce platforms do not offer the necessary store inventory visibility and traditional Point of Sale solutions do not have the necessary tools to fulfill online orders. To make matters worse, building custom screens into legacy POS terminals to support store fulfillment is time-consuming, inefficient, and costly, and your existing warehouse management solutions are not suited for deployment in a retail store environment. What now?
The answer is clear. Retailers must invest in a new system called Distributed Order Management (DOM) that integrates with Digital Commerce and Point of Sale to accept online orders, check inventory availability across stores, and route orders to the nearest location to the customer. DOM also provides in-store fulfillment solutions like hand-held devices for store associates with built-in scanners for picking, packing, and shipping orders.
Step 3: Get To Work
Time to get to work. So where do we start? HotWax believes that best-in-class technology is the foundation of any successful ship-from-store initiative, so we recommend beginning by selecting a Distributed Order Management Service provider. Do some research online and set up introductory calls with shortlisted providers to get a better idea of their differentiating factors.
Once you’ve made a decision, create a project plan. Get your store operations teams and DOM technology provider in a room together to define action items. What is the integration and implementation timeline going to look like? When can you begin offering ship-from-store to your customers and what needs to happen on both sides for this initiative to be rolled out successfully?
While your DOM provider is working hard in the background configuring the necessary technology for your initiative, begin training store associates and perhaps hiring new store associates to handle online orders. And don’t be fooled: training is not a one-and-done. As practices evolve and customer expectations rise, best-in-class retailers train their associates twice a year to ensure the best service possible.
When you’re ready to begin rolling out ship-from-store, we recommend starting with a handful of brick-and-mortar locations before expanding to your entire store network. Learn from the real-life experiences of your associates, store managers, and customers in order to optimize the processes and technologies necessary for a smooth organization-wide implementation.
Step 4: Set Up Key Performance Indicators
Once you’ve rolled out your ship from the store initiative across locations, it’s critically important to put Key Performance Indicators in place to measure the success of the program. Some important KPIs include:
Inventory Sell-Through: Do you see an increase in the inventory sell-through rate? The average inventory sell-through rate is 20% - how does yours compare?
Inventory Turnover Ratio: Do you see an improvement in your inventory turnover ratio? The average inventory turnover ratio for the fashion industry is between 2 and 4 - how does yours compare?
Shipping Costs: Are you seeing a reduction in shipping costs in your balance sheet?
Markdowns: Are you able to effectively clear inventory to avoid markdowns?
eCommerce Fill-Rate: Do you see an increase in eCommerce fill-rate? The average eCommerce fill-rate for fashion brands is 70-80% - how does yours compare?
eCommerce Conversion Rate: Do you see an increase in conversion rate? The average eCommerce conversion rate in the fashion industry is 1-2% - how does yours compare?
It is essential to set these Key Performance Indicators as a means of aligning all team members against a common goal, measuring success, and identifying areas of optimization. As a forward-thinking retailer, you should always be tracking the success of your initiatives against not only industry and competitor benchmarks, but internal business and customer service goals.
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Everyone wants, and expects, lightning fast delivery nowadays, and it may seem easy enough to turn your stores into mini-warehouses to fulfill online orders and reduce costs. However, ship from store will undoubtedly complicate your inventory management system and, if implemented incorrectly either due to outdated technology or insufficient training, will ultimately result in a worse customer experience. The key to a successful ship-from-store initiative lies in real-time inventory tracking, which requires a unified commerce approach through Distributed Order Management technology.
If you’ve decided to ship from store to be your next move, don’t expect an overnight implementation process. It will likely take at least two years to deploy new technology, train associates, and optimize internal processes to achieve the experience you’re looking for. Request a consultation with the HotWax team to learn more about our best-in-class Distributed Order Management solution and get started on your ship-from-store journey.