Will Ship From Store Neutralize Amazon?

Discussion
Oct 02, 2013

A growing number of retailers, including heavyweight chains Best Buy, Dick’s Sporting Goods, Gap, Macy’s, Nordstrom and Walmart, are using stores as mini distribution centers to fulfill online orders. The idea is that "ship from store" allows retailers to be more responsive to customer needs while cutting costs in the process. In the end, the chains believe they’ll gain a competitive advantage over Amazon.com and others as a result.

"Some people talk about Amazon with their 100 distribution centers, God bless them. We have 2,600 distribution centers," Glenn Murphy, CEO of Gap, Inc., told USA Today. The company began shipping online orders from its Banana Republic, Gap and Old Navy locations in 2012.

In a March RetailWire poll, 65 percent of respondents said ship from store would give bricks and clicks retailers a meaningful competitive advantage over pure play e-tailers in the next three to five years.

Matt Nemer, a retail industry analyst at Wells Fargo Securities, told USA Today that ship from store "is the most important thing that will change physical retailers over the next five years."

Do you agree or disagree that ship from store “is the most important thing that will change physical retailers over the next five years?” Do you see this trend significantly cutting into Amazon’s business?

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26 Comments on "Will Ship From Store Neutralize Amazon?"

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Dr. Stephen Needel
BrainTrust

Not even close to the most important thing. For shoppers, this is irrelevant. They want the right product at the right price in the right amount of time. From reading these articles, it’s unclear that any of these have an advantage over Amazon.

Warren Thayer
BrainTrust

My jury’s out on this one. I use Amazon a lot because no single retailer could have the variety and SKU count that Amazon has. I also like the product ratings, which of course I take with at least a dash of salt.

For basic commodity drugstore needs, for example, I use CVS or Walgreens’ online stores, but if I’m not sure about exactly which product I want, and need to do a bit of research, Amazon still is my best bet. Can’t give any statistics, but I would guess I’m not alone.

Dick Seesel
BrainTrust

I agree that the “ship from store” concept is a leap forward for brick-and-mortar retailers, in the sense that they will be able to leverage their inventory and expenses more effectively. But customers who visit their local department or big-box store will have the same expectations about customer service standards as before – along with the ability to “touch and feel” the goods. Brick-and-mortar stores need to ensure that they do not starve customer-centered payroll while managing the logistics of turning themselves into mini-fulfillment centers.

In the meantime, Amazon still has huge competitive advantages in breadth of assortment and pricing that no single brick-and-mortar store can compete against. And it continues to develop new “store within a store” concepts to target emerging growth opportunities – so I wouldn’t lose sleep over the Amazon outlook anytime soon.

Max Goldberg
BrainTrust

Ship from store is great if: 1) It speeds delivery to consumers, and 2) Stores have the inventories on hand to fulfill the orders.

My local Gap stores tend to have thin inventories. I don’t see how they would be able to fulfill a meaningful quantity of orders. Combine that with Gap’s inconsistent pricing (between online and in-store), and the result could be a consumer nightmare.

Amazon has succeeded because it ships quickly and has a wide variety of items in stock. I don’t think ship from store is a threat.

Ken Lonyai
BrainTrust

I find this a bit humorous. Essentially, retail has been asleep at the wheel, ignoring e-commerce in its early days, then getting nervous about it, and then trying to play catch up. Amazon saw the future and built a distribution juggernaut and now some brands think that it’s a quantity battle – that is, having more points of distribution means that they can be more effective. I think those retailers making such an assumption have a loaded gun pointed at their feet.

To believe that the implied process: web site, to internal inventory control system, to local store manager, to local store staff, who then pick, pack, and label items for home delivery is going to be reliable and effective against companies that (now) have many years of multimillion dollar investments and process iterations, is once again, the retailer’s folly.

Ryan Mathews
BrainTrust

Not necessarily “the most important thing.” Not by a long shot.

Let’s face it, it’s a volume issue. If suddenly any individual Gap unit had the majority of its orders shipped to home, it would be, at a minimum, disruptive and, at worst, paralyzing.

There’s all the question of the cost of the service. When all costs, goods and services are fully loaded, Amazon and other e-tailers may still offer a better deal to shoppers.

True, it does solve the immediate gratification problem … or does it? If I won’t wait for Amazon to deliver something, why will I wait for the Gap? The counter will go something like, “Customers will be able to access the brands they like!” But … er … can’t most customers do that now?

Five years takes us out to 2018 and I think by then physical retailing will have to come up with something a tad more interesting to survive. And, as far as Amazon goes, I don’t think it will notice.

Bob Phibbs
BrainTrust

Ship from store isn’t the most important change from a consumer point of view. My concern is that the merch could be shopworn when shipped to the customer. That’s never something an Amazon customer faces.

Chris Petersen, PhD.
BrainTrust

Amazon has a fifteen year lead on technology and infrastructure. Amazon’s impeccable service, in both shipping and order followup, have earned them incredibly loyal consumers. Amazon also constantly changes the “rules.” The are only a couple dozen distribution centers away from being able to offer same day delivery in many major markets.

Ship from store will be necessary, but not sufficient for bricks and mortar to survive. Ship from store enables physical stores to greatly broaden selection and reduce inventory by enabling a “virtual shelf.” But … and this is a big BUT … retail stores were set up for “displaying” product, not distribution. There is very little extra space in current planograms for stores to become a “distribution center.”

The most important thing that will change physical retailers over the next five years will be creating a store experience that consumers value. And to do that, consumers’ experience must transcend product purchase and how the product gets shipped.

To survive and be competitive, physical stores must offer something Amazon can not … amazing personalized services for the purchase transaction, and after the sale. Increasingly, the physical store profitability is in the services, not the product.

Ben Ball
BrainTrust

Another case of management confusion.

With the arguable exception of club stores, which are essentially just the last node of a distribution chain, there is little or no outbound distribution capability nor expertise in a typical retail store.

As my UPS distribution center manager son will quickly tell you, proximity to the ultimate delivery point only advantages physical delivery costs (gas). Everything else is driven by handling efficiency and accuracy. Somehow I don’t see the Gap store manager equaling a UPS DC manager in shipping skills.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
3 years 8 months ago

What I love about the ship from store option for brick and mortar is it allows retailers to move inventory from stores that might be overstocked or not from a store that is under-stocked.

Example: A customer buys a pair of jeans size 32 and they live in Scottsdale, AZ. GAP has 3 stores within 40 miles of the customer’s home address. Two of the stores have 2 pairs of jeans size 32. The 3rd store has 7. Now GAP can send the size 32 from the store with 7 which provides them a way to move inventory without putting the item on clearance.

The more retailers can blur the lines between distribution channels (the way customers shop) the better. Customers want what they want when they want it. They don’t care if they are in store, online or using their mobile phone. Make it easy and seamless and you win.

Camille P. Schuster, PhD.
BrainTrust

It is not the most interesting thing. Visibility into inventory to know which products are where, what demand is at each store, and what impact a shipment from a specific store will have on out-of-stocks, and decisions about which distribution point should be used to fulfill an order is extremely complicated. Doing this well to get products to consumers in a timely manner without creating out-of-stocks is critical to meet both levels of consumer demand. This level of inventory insight and decision making will surely result in other, even more interesting, changes in the future.

Peter Charness
BrainTrust

It’s one facet of the problem. Convenience is really the issue, but convenience is not just time to delivery, it’s also ease of shopping (online or in-store), breadth of assortment, price/offers, customer engagement, confidence in the brand, and then time to use. People looking for silver bullets should recognize that it takes more than one bullet to fill a gun.

gordon arnold
Guest
Ship from store is much more than a three word mantra to keep us focused on our march into the future of retail. It is millions of lines of software code and data files that enable a seamless 21st century commerce for sales and service. The hardware and software to enable the desired enterprise system for consumer use and or acceptance is being developed from a user device or social media perspective. This is causing Information Technology (IT) departments to create and deploy sites and apps that must use a hunt and peck development plan in the live market. Simply put, most of the software available for consumer use is clumsy, incomplete, and an escalating burden to the support side of IT departments everywhere. For that reason, the e-commerce community is lost when attempting to locate, build and manage brick and mortar facilities that can sustain profits without the e-commerce trade. Likewise brick & mortar stores are building e-commerce businesses that increase sales dollars and volumes at the expense corporate profit margin. Mergers aren’t working but they have identified some of the most hardened obstacles in developing a plan to merge the two commerce methods. What we are seeing is… Read more »
Ed Rosenbaum
BrainTrust

Ship from store is a good move. But to think it will curb the advantage Amazon already has established ,one has to be living in a fool’s paradise. There will be some advantages such as lowering inventory in overstocked stores.

I am an Amazon shopper. They make it easy to part with my money and I can count on when I will have the order delivered. Brick & Mortar needs to concentrate more on getting customer service in place.

kali klena
Guest
kali klena
3 years 8 months ago

I agree it is an exciting proposition but it is all in the execution. Please check in here to read about my very interesting Google Express Shopping experience.

James Tenser
BrainTrust

Ship from store will hardly “neutralize” Amazon, however, it will help some stronger retail chains remain competitive in the era of the Incredible Dissolving Store.

Chain-wide, omni-channel inventory visibility is one of the keys to making this work. In the best version of this, each store becomes a portal for product information, physical goods and value-added services. The customer chooses how to interact and obtain product according to their needs on each occasion – in-person, online or at home or office.

To accommodate this, I foresee over-sized big box and department stores tightening up their inventories and showroom space, while allocating more backroom for product handling, pack and ship functions.

Gene Detroyer
BrainTrust

Ship from store is a disaster in the making. It is completely contrary to the purpose of a store. Amazon has a business model to get the right product to their shopper at the right price and do it quickly. From the top to the operators in the warehouses, every person is geared to meet the company’s objectives. What do we tell the associates in the stores their job is? And even if we were to give each store a “manager” for online orders, can that manager ever be as competent as the operators in an Amazon warehouse?

With regard to inventory, this exacerbates the problem rather than facilitates good inventory utilization. It is already difficult to have the correct inventory balance in 2,600 locations without an additional variable. The retailers are going in the wrong direction. They should fill in-store orders from the direct-to-consumer warehouses. That would create considerably better inventory utilization than the opposite.

Shep Hyken
BrainTrust

I don’t think that ship from store “is the most important thing that will change physical retailers…” All the retailers are doing is trying to recapture a few sales. They should stop trying to match Amazon.com and come up with their own unique value proposition that will make a customer want to do business with them.

Mark Burr
Guest
3 years 8 months ago

This is nothing more than an extension of the capability that retailers and department stores have had for years! Has it changed retailing? No! Has it given them an advantage? No!

Have you had this experience before?

Clerk: I’m sorry, we don’t have that in your size. I can check the store across town and you could pick it up there or we can send it to you?

Customer: No, thank you.

What this offer is doing is taking that same approach from the distribution center and leveraging in-store inventory. It is not a game changer. It is simply taking advantage of something they could have been doing for years.

Mr. Murphy, as a CEO, clearly doesn’t understand Amazon. The GAP is not Amazon or anything like Amazon. If he was interested in transforming the GAP to be more competitive, he might be advised to study a more similar retailer like Zappos.

The reality is, the most important thing that will change physical retailers over the next five years hasn’t been thought of yet. This capability is not it. It certainly won’t even make Amazon bat an eye.

Herb Sorensen
BrainTrust

There are three components of retail:

1. Meeting of minds – the heart of the sale, or selling.
2. Delivery of the goods.
3. Exchange of money.

Every bricks and mortar store is more or less operated as a neighborhood warehouse, where shoppers can serve themselves by selling to themselves what they want (#1) and stock-pick from the store/warehouse (#2) and pay at the checkout (#3), the battle for retail space requires EVERY retailer to give careful attention to EACH of these three, distinctly, leveraging whatever possible strength they have.

Amazon is moving delivery closer to the customer, and is holding the high card in efficiency of #1. #3 is not yet making a huge difference from retailer to retailer, although we did discuss “Kroger loses some wait,” sometime ago at RetailWire.

Every retailer should understand very well their own assets relative to each of these three functions, distinctly. They should also understand how their two MAJOR competitors, Amazon and Walmart are managing each. Then either up your game, pray, or retire!

Lee Peterson
BrainTrust

We just did a study of over 2,500 people across the US on digital/retail integration (DRI) and the single most favored feature was what we call BOPIS (buy online, pick up in store).

If that plays out and stores become pick up centers AND great brand experiences, the assumption will be correct. Of course, we have a ways to go for “great experiences,” but BOPIS will start that ball rolling.

Gary Chatman
Guest
Gary Chatman
3 years 8 months ago

Who knows with channels after channels today and what’s on the drawing board for tomorrow as to the most important change. What we do know is they will change.

Cutting into Amazon’s business is a tough run. Amazon is so far ahead in the game and no one expects them to spend the next five yeas sitting on the bench.

Gerardo Lago
Guest
Gerardo Lago
3 years 8 months ago
This needs to be the new frontier for brick-and-mortar retailers, especially those with stores at well attended malls where its often difficult for shopper to find parking. At malls it will be easier, if all retailers and the mall’s management work together to set up all that is needed to offer this kind of service. The question is; given the choice to buy the same product, Do we rather make a purchase through the Internet from a place we have been and are familiar with or from an e-retailer we don’t really know? Also, given the increase in living expenses coupled with the job and family demands for our time, which at the end leaves us with very little personal time, traditional retailers offering this kind of service can only be a win-win situation for both merchants and customers. Even though Amazon does ship to Puerto Rico, there are still many e-retailers that do not ship to us. At least, for us here in PR, retailers adding this service would make it easier and more appealing to consumers to buy directly from retailers we are familiar and comfortable with. The best way for retailers to accomplish this is to enlist… Read more »
Mark Price
BrainTrust

Ship from store is fundamentally a cost play. The real benefit that Amazon has is a combination of Amazon Prime and the ability to personalize the customer experience and thereby create a barrier to exit. Simply put, Amazon provides what you need as an individual and then gets it to you quickly and economically.

Ship from store ignores customer experience, which is understandable, since most big box retailers suffer from poor performance in that area.

Arun Channakrishnaiah
Guest
Arun Channakrishnaiah
3 years 8 months ago
Store systems and store processes and the integration of store processes and data such that it can used effectively in an OMNI channel scenario is simply not up to the mark right now to make “store fulfillment” a competitive advantage. Sure ship-from-store is an improvement for retailers, but it is more in the form of opening up another fulfillment channel for orders that they would otherwise let go of (because their DCs have run out of inventory). Ship-from-store is also a vehicle that retailers will use to clear out inventory that is not selling at their stores. For store fulfillment to be a competitive advantage, retailers will have to strategically place additional inventory at their stores. This goes against most buyer’s mandate (which is to keep in-store inventory as small as possible). Also the cost of carrying this additional inventory (in a prime location that most stores would occupy) will not make this a viable proposition for most retailers. Also as others have pointed out, store personnel simply can’t replace warehouse personnel and setting up the processes and staffing the personnel to be efficient at ship-from-store is no simple task. The ROI the retailer will see with doing this will… Read more »
Dan Frechtling
BrainTrust

The most important thing that will change physical retailers over the next five years is not ship from store. Rather, it is (a) the influence of online behavior on offline purchases and (b) the role of mobile in (a).

43% of U.S. retail sales are web-influenced, according to a cross-channel shopping study by Forrester. This amounts to nearly $2T, compared to the $200B value of ecommerce estimated by Comscore. So online influence is 10X the size of ecommerce, and ship from store is a small segment of a small segment.

According to a study released in August by Local Corp, product research behavior is accelerating rapidly on smartphones, far outstripping desktop and tablet.

The most common activities among mobile users in store are looking for coupons, comparing products on Amazon, and looking up ratings and reviews. These are low lying fruit for retailer websites to step in and solve shopper problems.

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