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What if the cheapest option for fulfillment isn’t the closest one? Or what if the location with the bulk of the inventory ends up being cost-prohibitive? Most retailers are losing money on omnichannel delivery because they don’t know how to solve for these questions.
An OrderDynamics study of the actual omnichannel capabilities of more than 330 U.S. retailers found that 7 percent are conditioning customers to expect free shipping by providing it when the customer hits a minimum purchase threshold. Seems reasonable. But when a customer has to purchase several items to get over the minimum order size, it increases the routing complexity. Suddenly, with inventory spread out over multiple locations, you may have a “single order, multi-box” scenario. This inevitably leads to a lackluster customer experience when several boxes arrive on the doorstep, with a corresponding big hit to your bottom line.
When done properly, retail order consolidation contributes to significant margin improvement, as store-to-store merchandise transfers are more cost-efficient than multiple last-mile shipping methods. Multiple shipments also mean more packaging. If shoppers are made aware of the fact that you’re making the effort to eliminate waste and reduce your carbon emissions on their behalf, you may just boost customer loyalty while satisfying their needs.
To deliver successfully on retail order consolidation, it makes sense that your first step is to determine exactly how to get the ordered products into a single location for packaging. To keep an order whole, it’s often worthwhile to configure orders to come from the location with the most inventory already present. This does help limit shipping costs and adds to efficiency — but then a retailer is looking at the possibility of every store being a “ship-from” location.
To enable every store to act as a shipping center, there are headcount and resourcing demands to weigh. Do you hire sales associates with relevant shipping experience, or will existing team members be trained? Are you increasing the number of employees in each store so that they can be ready at a moment’s notice? What about a fully equipped shipping room with the necessary materials to pick, pack and ship?
Another model that retailers use as a part of their omnichannel strategy is the sophisticated hub-and-spoke approach. In this method, retailers predetermine which location will serve as a hub store, independent of actual inventory. The use of a multi-purpose store and distribution center enables a localized approach to centralized fulfillment. It means that specialized associates are on hand for picking, packing and shipping. In the end, this approach is significantly more efficient than spreading out ship-from-store abilities to every location, like your pop-up stores.
Online orders across all retail categories are on the rise, and retailers are under pressure to reduce the cost associated with fulfillment. In addition to cost, efficiency is paramount — customer confidence hangs in the balance, as shoppers expect retailers to deliver quickly. To delight customers and maintain profitability, retailers should refine their processes and explore cost-effective technologies that support advanced order consolidation strategies.
Nick McLean is CEO of OrderDynamics.
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