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.
This is the best of both worlds: In-person shopping to experience the product first-hand with the convenience of online shopping/delivery. It takes a lot of the effort out of shopping for large/bulky items (no more asking for favors from friends/family members with vans). Of course, the real purpose of this is to get shoppers to download the app so Sam's can track their shopping behavior and tailor promotions. etc. If as a shopper you're cool with that, go for it!
I'm not sure a ghost kitchen will drive traffic to the mall as consumers have now become used to home food delivery -- trekking to a mall just to sit in a food court seems like a stretch. The more likely scenario would be more opportunity for ghost kitchens as they would no longer need to rely solely on digital promotion and be able to take advantage of mall foot traffic.
Retailers like Lego need to make their stores a destination if they want to compete with private label knock-offs and the likes of Amazon and Walmart who can ship their products same-day/next-day for free. The more shoppers that buy playsets directly from Lego stores, the more margin Lego can hold on to. That in addition to additional impulse purchases and generational brand building.
A time guarantee around curbside/in-store pick-up is another part of the ever-growing omnichannel package that can make or break a sale. For example, companies like Target, Walmart, Office Depot, Best Buy and Staples may be competing for the same customer with similar or identical products. If the prices/products are the same and the stores are a similar distance from each other, but at one retailer I can swing by in an hour, wait a couple minutes in the lot, have someone load the trunk and I'm on my way -- the other retailers will need some major differentiation to get me to wait an extra two to five hours.
Retailers like Home Depot and Costco have the capital and clout to dictate shipping terms (or get their own ships!) but for mid-market retailers, this just isn't an option. Air freight is a margin killer, so use sparingly (if there's capacity of course). This leaves importers/brands/retailers with few options except diversify the base of manufacturing, order early, explore expedited sea freight options, shop around at different forwarders to see who has capacity and order more up front to anticipate future bottlenecks.
Let's not forget that the reason why real estate prices are low is because of the over-expansion of retail stores in the first place. So I would caution any retailer to expand without understanding the ROI for each additional location. That said, omnichannel is about the seamless integration of physical and digital. Just because an online presence exists or is enhanced, that doesn't mean that brick and mortar should be minimized. It's about striking the right balance of optimizing service to current customers, while being visible and accessible to new and potential customers, both online and in-person.
Offering a fast turnaround for BOPIS/BOPAC should be seen as a competitive advantage -- something that will drive customers to your store vs. a competitor's due to the speed and convenience you're able to offer. I say the quicker the better. The challenge comes in the way of available capacity. Not enough staff and you don't meet SLAs. Too much staff and overheads are high. There will be a learning curve where retailers will need to test and see the optimal staffing levels for any given day and hour of the day. From a technology perspective, big box and department stores should also look at technology to expedite the picking of items from store shelves or the stock room. Micro-fulfillment (without the automation) aka "store-as-warehouse" systems would direct associates to the item location, much like a WMS system does in a DC. For large stores with many SKUs, these systems would reduce the time spent picking or retrieving products off the shelves, helping to meet SLAs.