Think Tank

Why Retailers Are Struggling With Ship-From-Store Fulfillment

The age of the omnichannel is all about options. Customers buying online should be able to receive their purchases in any way they choose — at home, work, a designated retrieval point, or direct from the store. Or so goes the theory.

In particular, retail stores are still struggling with the challenge of efficiently shipping items directly to the buyer. It’s one thing for a million-plus square-foot distribution center to pick and ship an online order. That’s precisely what it’s designed to do.

Making that process work from the sales floor or backroom of a retail outlet is another matter entirely. Stores aren’t set up to do that. They accept product from the distribution center in bulk, and sell individual units from the shelf. The establishment of an onsite fulfillment center for direct shipment to the customer requires a different set of capabilities, in terms of technology, space within the store, and the role of store associates.

So it should come as no surprise that retailers are far from establishing a smooth means of delivering online orders from the sales floor. Says Marc Gorlin, founder and chief executive officer of delivery service provider Roadie: “They’re maybe halfway through the first inning. Certainly no more than the second.”

Direct delivery from the store requires a whole new approach to inventory, Gorlin says. Stocking strategies must take into account both online orders and traditional customer traffic. Distribution centers must be cognizant of the differing needs of each retail location.

At the most basic level, retailers must know exactly what’s in their stores, then be able to accurately convey that information to the online shopper. And what happens if a customer walks in and buys an item that the retailer had promised was on the shelf?

Of course, no store within a retail chain is an island, and any given item can be obtained from another location if necessary. But that assumes a level of inventory visibility across all outlets — not to mention the ability to transfer product between stores with minimal fuss.

For a retailer, the worst outcome of an online shopping experience is cart abandonment. So it will strive to promise the consumer that an item is in stock and available for delivery wherever possible. Woe to the retailer, however, that makes a promise on which it can’t make good. Social media is the cruelest weapon of consumer revenge.

The challenge lies in turning the brick-and-mortar store into a forward D.C. The considerations are many. What’s the taste of consumers within the geographical area of a particular store? How do seasonal trends affect local demand? Can vendors adjust production and delivery schedules to account for markets with varying levels of demand? Is the setup scalable across multiple stores?

And finally, how does the role of store employees change, under a direct-shipment fulfillment system? In addition to their traditional role of servicing in-store customers, they might have to do double duty as pickers, packagers and labelers. The store will either have to redirect some of its human resources, or hire more bodies to handle the additional tasks.

Gorlin says the biggest issue surround direct shipment from store is the inconsistency of order-fulfillment time among various outlets. In part, that’s a function of size — bigger stores, with a greater number of SKUs, are likely to experience longer pick times. They risk alienating the demanding (some would say spoiled) online shopper, who would otherwise to accustomed to acquiring an in-store purchase instantly.

“Now, all of a sudden, customers want stores to do all the work that they did for themselves previously, for very little money, and eventually for free,” says Gorlin. “There’s a lot more work created on the store side, before you even get to the delivery.”

Technology is also an issue, for those stores that operate legacy inventory-management systems and need newer solutions that meet the needs of the omnichannel. “The older the systems are on the retailer’s side,” says Gorlin, “the more complexity they have to deal with.”

More direct deliveries of individual packages means a need for more drivers. Here, the “Uber for freight” model, whereby independent contractors are standing by to deliver orders on demand, could be of value. Gorlin says the driver pool could even extend to consumers who happen to be headed in the direction of an online shopper. Or store associates could be tapped for the task during periods of peak demand, assuming they can be spared from the sales floor. For their part, services like Roadie and Deliv are clearly hoping that their business will balloon with the popularity of the ship-from-store option.

None of the potential obstacles to direct shipment from store will stop retailers from embracing it. They simply have no choice. Amazon.com, with its Prime service and unmatched expertise in fast fulfillment, is forcing the hand of traditional retailers, especially in the area of same-day service.

Gorlin predicts that every major retailer will at least have a plan in place for launching direct shipments within the next 18 months. “People are rushing rapidly to it,” he says.

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