What could be interesting is if retailers start taking ownership of the last mile. That is, use their own fleet and drivers to deliver online orders. From a technology perspective, a Transportation Management System (TMS) with fleet management, GPS tracking, notifications, etc. would get the job done with low implementation risk. The harder part would be carving out this outbound logistics division within the existing retail organizational structure.
Omnichannel retail is about the seamless integration of physical and digital retail experiences. It doesn't really matter who owns what, as long as the environments are harmonized. A website, store, pick-up location, return location, delivery company drop-off location, etc. are all pieces of an omnichannel puzzle that need to fit together perfectly, but do not necessarily need to be part of the same organization. The glue that will hold all of these pieces in place is technology, like open APIs.
Features like inventory visibility, dynamic pricing (and possibly personalized pricing) and optimized product search will make showrooming even more problematic for competing retailers. Whether or not a shopper came in to the store specifically for the product "showroomed," a lost sale is a lost sale. To combat the effects of showrooming, shoppers need to be incentivized to buy here and now. Retailers will need to determine which promotional levers will work for them, and could include price matching at checkout, loyalty points/club, sales-oriented associates (with the ability to make deals), store rebates, etc.
To get BOPIS to its maximum effectiveness, retailers are going to have to start treating their stores the same way they (hopefully) treat their DCs because in effect, what they are doing is converting stores into mini-DCs or (micro DCs, hence the term micro-fulfillment). That means inventory accuracy, which traditionally hovers around 60-70% for a retail store needs to be much closer to 100% and pick and pack needs to be optimized (more for big box stores than small boutiques) so that SLAs can be met, pickers are not clogging the aisles and store associates are not wasting their time searching for products. The way forward is with a store-as-warehouse type solution, where inventory is received, put away and picked much like it is in a DC. Until we get to this point, retailers offering BOPIS will continue to struggle with out-of-stocks, long lead times for pick-up and reduced productivity.
As a proponent of omnichannel retailers leveraging store networks for fulfillment and all the advantages that come with this model (inventory pooling, BOPIS, cross-channel returns, shorter last mile, etc.) this seems like a backward move on the surface. However it's designed to attract investment, divest assets and is more a financial play than a supply chain play. What Macy's (and HBC) need to do is prioritize integration between the two entities to ensure the omnichannel customer experience remains intact and continues to be optimized. Completely doable with the right processes and technology.
As long as there will be consumers of high-end, exclusive fashion items, there will be merchandise destruction. You just can't have, for example, last year's Louis Vuitton purses being sold at Marshall's. The brand will lose its cachet. So when it comes to high fashion, the only way around this is to forecast demand more accurately so that destruction is not needed or limited. More easily said than done.
I find it hard to believe that with people cooped up for so long, they'd want the store to come to them rather than them going to the store. The future of retail will be a mix of online and physical shopping. Online for the stuff you don't really feel like shopping for or that's a hassle (e.g. groceries) and stores for the stuff that's fun to shop for (e.g. fashion apparel, cosmetics, tech like mobile phones, sporting goods, etc.) or that you absolutely need today.
If you're a retailer and you want to reduce last mile costs while accelerating delivery times to compete with the likes of Amazon, in-store fulfillment is a must.
The biggest obstacle to doing it is understanding how it works from a technological and process perspective and then optimizing it for your particular operation.
The technology is straightforward: Order Management System for (among other things) inventory visibility and order routing and a Micro-Fulfillment aka Store-as-Warehouse system that can record inventory locations and direct store-associates/pickers to fulfill orders in the most efficient way possible (similar to how a picker is directed in a DC). Note: I'm not talking about automation/robots here.
To address the pain points:
1) Inventory Accuracy: when goods are received, they need to be recorded by the Micro-Fulfillment system either by scanning or RFID. If over time inventory levels are still inaccurate, shrink is the likely culprit. Also, what's stopping retailers from doing additional inventory counts in stores, especially if they stop using DCs for fulfillment?
2) Sku complexity: If you're pursuing a store fulfillment strategy, your online store should reflect your physical store. All items available online should be in every store. If they're not and you're worried about split shipments, a good OMS will consolidate multiple shipments to create one order.
3) Demand forecasting: Store forecasts will need to take into account e-commerce orders as well, using historical order data to create geographic models of demand. The geography will dictate which store is likely to be the fulfillment node. In a nutshell, forecasts for each store need to include both digital and physical sales.
4) Picking costs: What is driving the cost? If it's a productivity issue, the Micro-Fulfillment system will make short work of this by streamlining picking.
5) Execution quality: ideally, picking should be done from the back store/stock room first, then from the sales floor if items are not available in the back. But once again, even when items are picked from the sales floor, the system will streamline the picking process so that it's executed more efficiently, reducing disruption.
Retailers who haven't embraced a true omnichannel model basically have three options:
1 - Continue on the current path, which means very limited to no omnichannel offering. In the short term, your profit margins may be higher, but over time you'll lose business to competitors that have embraced omnichannel.
2 - Continue to use an "improvised" band-aid omnichannel solution. This will also work in the short to medium term, but the inefficiencies will continue to eat into profit margins and the customer experience will also suffer.
3 - This is a two-parter: a) Embrace omnichannel and implement the proper systems (e.g., an order management system); b) Continuously refine and improve your fulfillment model to ensure profit margins remain healthy. That means exploring multiple fulfillment methods (store fulfillment vs. micro-fulfillment vs. drop shipping vs. 3PL or any combination of these, depending on customers' geographic location; planning store assortment for e-commerce, different last mile delivery options, etc.) . It also means driving the right customer behaviors (if BOPIS is more profitable than home delivery and also spurs incremental sales, incentivize the customer to pick up in store vs. delivering to them).
Companies like Target have already mastered how to extract the maximum from their omnichannel model, and retailers who haven't yet need to follow suit.
For companies like Canadian Tire, with large volumes of imports, this is a great idea as it gives them "priority" access to the their shipments at the ports they own and can also be seen as an additional revenue stream. It also gives CT an advantage over competing retailers who are currently all vying for the same space and shipping equipment to get their merchandise into warehouses and stores.
Before the pandemic, I remember hearing about how the carriers had too much capacity; there were too many ships, blank sailings and carriers were struggling to break even. Fast forward post pandemic and the balance of power has shifted. Maybe carriers don't want to increase capacity at the expense of their own profitability? Add to this "reduced" capacity: existing labor shortages in North America (ex. truck drivers) and labor shortages in countries of origin due to outbreaks, and we have a perfect storm. Until labor levels stabilize, we will continue to see these challenges. Retailers will need to rethink their entire supply chains if they want to reduce these kinds of shortages in the future. This means onshoring of manufacturing and creating a network of manufacturers spread out over multiple countries and multiple continents.
I guess the most obvious solution for this problem in the short term would be to attract workers not only with increased pay, but benefits as well. Working at the warehouse could be seen as a long-term career opportunity (as manufacturing once was) and not a short term gig to bounce from after a short period. The long term (less obvious?) solution would be increased automation with robotics, AS/RS, etc. This will happen when the cost of DC/WH labor begins to exceed the cost of implementing and maintaining the system in the long run. Note, the future of distribution will be a combination of human and robotic resources with the human element taking over the more complex tasks and robotics handling the more mundane, repetitive tasks.
If big box department stores have the extra space and the coveted foot traffic, it makes sense for beauty retailers/brands to set up shop (within a shop). This is not that much different from setting up shop in a mall, except the store is integrated into an existing space and not standalone as it would be in a mall.
The percentage of online orders a retailer should fulfill from a store will depend on a number of factors, which include proximity of the store to customers, the size of the store, store sales (non e-comm) and the replenishment cycle. Fulfilling from stores is a great way to reduce last mile costs and speed up delivery, but not at the expense of store sales. If a store has great sales per square feet (again, non e-comm), using inventory from that store to fulfill online orders may cannibalize store sales -- which are higher margin because no shipping is involved.
An alternative could be to open a micro-fulfillment center (i.e. an extra stock room) adjacent to the store to fulfill online orders.
Hyperlocal fulfillment/micro-fulfillment--whatever you want to call it--requires striking a balance between meeting both physical and digital shoppers' expectations.