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Shopify store fulfilment omnichannel order management

Shopify Multi-Location Fulfillment vs. Smart Order Routing

by Aditya Patel |
Shopify Multi-location Fulfillment vs. Smart Order Routing

Two of the leading trends in today’s consumer market are same-day Buy Online Pick-Up In Store and Ship From Store. Why? Customer satisfaction. 

Research shows that 32% of loyal customers would switch brands instantly after one bad customer experience. Furthermore, businesses have found that customers will pay upwards of 16% more for goods to obtain a premier customer experience. While online transactions are increasingly out-pacing credit card swipes at the store, many users still want their new purchases the day they order, either by pick-up or delivery. To remain competitive and ensure client satisfaction, retailers need streamlined omnichannel initiatives like same-day BOPIS and Ship From Store.

In response to this growing need, Shopify’s multi-location fulfillment feature was launched to help retailers leverage multiple locations to fulfill their online orders. With this feature, Shopify merchants can launch simple store pick-up and Ship From Store initiatives. This feature works well for small retailers, for example, those with one warehouse and up to five stores. However, as your business scales, things get complicated. Shopify’s solution is not designed to handle more complex business use cases, with a large network of fulfillment locations across regions. 

We’ve spoken with multiple enterprise retailers with more than 20 store locations who are currently utilizing Shopify for their omnichannel initiatives. From these conversations, we identified some key challenges larger retailers face when using the Shopify multi-location fulfillment solution. 

Inventory Discrepancies & Synchronization Delays

As you may know, Shopify offers multiple subscription plans and limits the number of locations a retailer can use. Even so, your location limit with Shopify maxes out at 20. As the number of store grows, delays in inventory synchronization pose a major challenge with Shopify multi-channel location fulfillment, leading to inventory discrepancies and broken customer experiences.  “Inventory discrepancy” is a broad term that refers to the mismatching of inventory counts in system and physically available inventory, which results in the overselling or underselling of available product. This can lead to a number of issues like delivery delays and out-of-stock goods when customers get to the store.  These hold-ups are hallmark examples of a bad customer experience. 

Moreso, as your business grows, the number of Shopify inventory discrepancies will increase, thereby further increasing customer churn. Instead, retailers should look for a dedicated Omnichannel Order Management system that is designed to synchronize inventory from multiple storage locations at scale. A key element of a successful omnichannel order management system is transparency into inventory availability across your sales channels. Using HotWax’s Omnichannel Order Management, enterprise retailers can leverage all stores in their network without worrying about technology challenges or inventory discrepancies. 

Inflexible Order Routing

Opening up multiple fulfillment locations brings retailers closer to their customer base, allowing them to offer faster delivery times and better customer experiences. However, Shopify’s multi-location fulfillment feature and default order routing do not help retailers achieve this successfully. Shopify order workflows are static in nature and fulfillment locations are given a priority in sequential orders. Once routed, Shopify starts allocating the orders based on the given priority. This can cause several disadvantages.

For example, Shopify’s static routing system determines delivery routes by checking the pre-defined priority of locations. In doing so, Shopify does not consider real-time customer proximity. By only factoring in warehouse and store locations, Shopify does not account for the customer's shipping address and shipping method. As a result, the order may end up allocated to a location farther from the customer's shipping address, entirely defeating the purpose of fast delivery and costing you valuable time and resources. 

Similarly, Shopify's default routing engine does not allow for “standard delivery” orders to be re-routed to warehouse or store locations with a low sell-through rate. By not considering inventory levels and delivery methods, Shopify’s order routing system can cause major delays by overwhelming high-volume warehouses and stores or missing quicker delivery opportunities. 

Growth businesses need a smart order routing solution that provides flexibility to configure custom order routing rules according to the needs of your enterprise business. Routing orders based on customer proximity and real-time inventory availability increases sell-through rate and reduced delivery time and cost. As you grow your network of warehouses and stores, you need an Omnichannel Order Management system that offers a dynamic routing engine. This software can analyze each order and make smarter, real-time decisions to increase profit margins and keep your customers happy.

Lack of Support to Manage Safety Stocks 

Many omnichannel retailers strive to find the balance between increasing online sales and keeping available inventory for brick and mortar customers. If retailers don’t have a clear-cut system in place for managing inventory across all channels, this can open the floodgates to bad customer experiences. For example, if a store carries 100 white shirts, they shouldn't allow for all 100 shirts to be available online, in order to leave inventory for walk-in customers. 

However, Shopify multi-location fulfillment cannot  assist in ensuring “safety stock” workflows for stores. With a dynamic Omnichannel Order Management solution,  you can regain the flexibility to set up safety stock for every product, in every store. By gaining more visibility, your team has better control over inventory and order flow management to ensure both in-store and online customers are satisfied. Of course, with a highly configurable solution like HotWax, retailers have the option to make the entirety of this inventory available across channels as needed for end-of-season sales and more. You should be controlling your retail tech stack, not the other way around!

No Threshold Visibility

Historically, retailers who use SKUs and barcode scanning to manage inventory only achieve about 60% accuracy on average. Merchandisers manage these inventory inaccuracies by utilizing thresholds. Unlike safety stock, thresholds are not managed at the store level. Merchandisers work off the presumption of inaccuracy,  thereby reducing the inventory of all products across all stores. Then, they allocate the remaining inventory to online channels. Unfortunately, Shopify does not offer the ability to manage thresholds, which can cause significant gaps in communication and inventory quantities. The right omnichannel order management system provides threshold management capabilities, reducing the risk of overselling due to inventory inaccuracy. 

Conclusion

As retailers scale their business, the number of stores rises, which can increase the all-too-common problems of inventory inaccuracy and synchronization if you’re not using the right omnichannel order management solution. If you’re using Shopify multi-location fulfillment, you’re missing out on the benefits of a dynamic order routing system, which can cause delivery delays and increase inefficiencies across your business. HotWax Commerce’s Omnichannel Order Management system integrates with POS and WMS and synchronizes inventory in real-time to minimize any inventory discrepancies and operating costs while maximizing inventory availability and profitability. By leveraging a robust omnichannel order management system, you can rest easy knowing your inventory and order management are fully optimized, and you’re gaining loyal customers along the way. 

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HotWax Commerce works with retailers to provide the best return on their inventory through omnichannel retailing strategies such as same-day BOPIS, Ship From Store, and Pre-Orders. If you are interested in learning how our omnichannel order management system can bridge efficiency gaps in your business and drive growth, contact our team for a free consultation.

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Aditya PAtel

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