Analyst insight: Former retail chain Service Merchandise nailed fulfillment and omni-channel in the 1980s with its innovative showroom-catalog approach. Here’s what the modern-day retailer can learn from the early pioneer. 

Today’s omni-channel retailer environment has come with a slew of challenges: messy fulfillment strategy, inefficient order packing, and neglectful store employees too busy picking online orders to manage customer service. 

In its heyday, retailer Service Merchandise, which closed in 2002, was a force to be reckoned with. With $4 billion in revenues and more than 400 stores at its peak, the company singlehandedly turned the “catalog showroom” shopping experience into one that consumers flocked to for fine jewelry, electronics, toys and other merchandise. 

These three strategic approaches put the company ahead of its time: 

Customers want to see and touch. Shoppers like going to stores to examine products, but then they pull out their phones to find the best deal. Knowing this, the question becomes: Is there really a need for high levels of inventory on the retail floor if all customers want to do is experience the product versus carry it to the register? 

With its part-catalog, part-showroom approach, Service Merchandise met customers where they were — long before mobile phones turned into price-comparison tools.  

Fulfillment and service are two separate jobs. Keeping inventory in the back room gave Service Merchandise another clear advantage: It could separate its customer-facing employees and its fulfillment workers. That meant the latter could be trained on how to efficiently pick, pack and ship merchandise, while storeroom staff learned how to deal one-on-one with customers. 

Today’s retailers could borrow a page from this model, as customer frustration and employee confusion are problems at many stores that pick and pack on the shopping floor.  

Technology drives omni-channel success. Had Service Merchandise weathered various economic downturns and shifts in the marketspace, there may be a few things it’d do differently today. For starters, it might have taken some of its early forays into warehouse automation and extended them to include advanced technologies like robotics, artificial intelligence and machine learning. 

Warehouse pickers, for example, would likely be equipped with wearable technology that enabled them to do their jobs faster in a hands-free environment.  

Outlook

Higher fulfillment costs continue to erode retail margins, and it’s time for stores to think harder about how to fulfill orders across all channels. By reflecting on early players and rethinking store design, retailers can gain advantage in the marketplace and begin to master the art of omni-channel. 

John Richardson is vice president of supply chain analytics at Transportation Insight.