Stores move to the front and center fulfilling customers’ expectations

Discussion
Photo: RetailWire
Dec 11, 2020

A little more than a year ago, I asked in a RetailWire article if 2020 would be the year when retailers would institute supply chain improvements with an eye towards enhancing the customer experience. I recommended retailers focus on automating post-purchase processes, expanding fulfillment options and finding efficiencies to reduce costs.

That is, of course, still the story today, but with a much greater sense of urgency, especially for grocers. Dramatic shifts in demand, online ordering and the increased costs of safety and delivery are eating away at retailers’ top and bottom lines.

Amazon.com has the breadth, depth, volume and infrastructure to fulfill and persevere. Many large chains are also investing to address their respective supply chain challenges.

Other retailers, however, don’t have the resources of the big players and they would be well-served focusing on two key strategies in 2021: reevaluating the role of the store in their businesses and rationalizing inventory systems.

When it comes to physical locations, retailers need to make immediate changes in stores to meet the consumer demand for last-mile fulfillment options, including curbside and in-store pickup, and same-day and one-hour delivery.

They also need to be moving to longer-term adjustments to facilitate traffic flow, store layout, back-room, storage, packing, receiving and staffing. Shipping more orders from stores means products are closer to consumers and less costly to retailers. Target has said that shipping from stores has lowered its costs by 40 percent in this regard. Both Target and Walmart have earned high marks for being able to convert store networks to their advantage during the pandemic.

The need is also keen to rationalize inventory. Centralized merchandise systems (buying, management and analytics) offer a single view of goods across all shopping destinations and locations enabling retailers to find the right balance of SKUs in the places they’re most needed to profitably meet demand. It is impossible to have real time universal visibility across all nodes when systems, processes and channels are siloed. Here too, Target has stood out for combining store and on-line merchandising systems. Walmart, well-known for its supplier relationships, recently followed suit. Both chains have improved the flow of goods in the process.

While much is unknown about 2021, there is no question in my mind that e-commerce will continue to grow and logistics will be front-and-center.  Doubling down on supply chain operations, insights and reconfiguring stores will improve customer service and create cost efficiencies.

DISCUSSION QUESTIONS: Do you see stores become the primary focal point for retailers’ digital supply strategies going forward? How important is it for retailers to unite merchandising functions across the entirety of their organizations?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Trying to return to pre-pandemic norms is fighting the future, and will have predictable results."
"All of the recommendations made make sense. Taken together, however, they amount to a complete overhaul — if not a complete rebuild — of the business system for many retailers"
"While customers have moved to e-commerce as the first point of engagement with many brands, brick-and-mortar locations still serve an important role in customer satisfaction."

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17 Comments on "Stores move to the front and center fulfilling customers’ expectations"


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Bethany Allee
Guest

Stores have to become the primary focal point for retailers:

  1. They’re a competitive advantage over Amazon;
  2. The expense of the physical footprint must be justified.

It is critically important for retailers to unite merchandising functions across the entirety of their organization. The retailers who’ve done the best job with this (Walmart, Target, Best Buy) are winning — this is the model for success.

David Naumann
BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
9 months 13 days ago

Consumers’ increased expectation for faster and faster delivery times is making retailers use stores as fulfillment centers to meet same-day or one-hour delivery promises. This places a lot of pressure on store personnel and necessitates the development of new processes in stores, but retailers have no choice. To enable omnichannel commerce that taps in-store inventory retailers need a unified commerce platform that offers accurate visibility of inventory availability across the enterprise. Without accurate enterprise inventory visibility, retailers will likely disappoint customers by over-promising and under-delivering.

Neil Saunders
BrainTrust

The upswing in multichannel fulfillment has created a lot of logistical and operational challenges for many retailers. Most stores were simply not designed to cope with the volumes of multichannel orders going through them so aspects like staffing, storage space, order processing, and customer service are all under pressure. Retailers have coped really well, but this is more by improvisation than long-range planning. However we are now seeing retailers think more carefully about what this means for stores. Best Buy isn’t the only retailer thinking about and experimenting with new store formats and configurations which are suited to multichannel.

Peter Charness
BrainTrust

In terms of the primary form of fulfillment, it depends on the type of retailer — but probably not. As an important part of a multi level fulfillment network? Certainly. If North American retailers were able to start with a fresh slate, they might have a distribution network that looked more like a typical European model — Country DCs feeding regional or city DCs feeding stores and/or customer fulfillment centers. In that model no store (or customer) is more than a few hours away from the source of their product.

Suresh Chaganti
BrainTrust

Stores are one channel for fulfillment. Any strategy focused on one aspect of the supply chain will not be very successful.

A typical brand sells on its own website, through Amazon marketplace, retail stores, its own stores, and through distributors. There are too many opportunities to lose sales because of misaligned inventory allocation. The inventory is available in the system, but just not available for the right channel. Investing in capabilities to minimize the stockouts and backorders is critical.

Ben Ball
BrainTrust

All of the recommendations made make sense. Taken together, however, they amount to a complete overhaul — if not a complete rebuild — of the business system for many retailers. Smaller regional and local retailers would be more successful taking smaller and more focused bites. For starters, multi-site retailers probably have at least one under-performing location. Turn it into a distribution hub and base all e-commerce fulfillment out of that location. If the space is more than you need, look for another local retailer with similar needs who might be a compatible partner for the space. Shared investment and infrastructure gets a bit more tricky but can be done. But Ms. Waldron’s predictions hold water, and that means not acting is not an option for smaller retailers.

Lee Peterson
BrainTrust

The operative term here is “most.” Many retailers just don’t have the wherewithal to pull off using stores as fulfillment centers the way Target now does. Having said that, there is no doubt that many smart brands will figure out that one of the few advantages they have over the behemoth Amazon is, in fact, physical locations — that is, IF they can keep them open at all. The recent foot traffic numbers are, without a doubt, a sign of things to come. Still, stores as fulfillment centers should be top of mind for those that can do it going forward. Hopefully you’re not going to close them all!

Dave Wendland
BrainTrust

This must be a fulfillment strategy for brick-and-mortar operators. This means adjusting physical floor space (as Best Buy has begun doing); adjusting traditional merchandising approaches; and investing in separate micro-fulfillment capabilities, technologies, and space allocation strategies.

Jeff Weidauer
BrainTrust

Shopping in a store has fundamental flaws, but the shift to e-commerce didn’t provide enough pressure on retailers until this year. Now the retail focus is on getting shoppers back in-store, even though most projections are that e-commerce – grocery in particular – will double its current level by 2025. The customer has moved online and stores have to adapt to stay relevant. Trying to return to pre-pandemic norms is fighting the future, and will have predictable results. The current support infrastructure of stores and distribution centers – while vast – is becoming increasingly irrelevant.

Dave Wendland
BrainTrust

You and I have been predicting much needed change to “legacy” retailers for years. And, like the boy who cried wolf, reality has struck. It’s not too late, however retailers must react fast or risk becoming another of the artifacts.

Gary Sankary
BrainTrust

Retailers have to unite their merchandising functions across all their channels, physical and digital. This is the reason unified commerce as a term makes so much more sense than ominchannel. The bottom line is customers see a retailer holistically, as one brand. To win, retailers have to be able to deliver their value proposition consistently across all their channels. Blending channels successfully is a huge advantage today. It builds loyalty with customers who have confidence to engage the retailer seamlessly. A physical location, in a neighborhood, extends a retailer’s capability to deliver their brand in a way that’s highly visible to their current and potential customers. This has been important, there’s been a lot of data out there about the “Halo Effect” in retail and the impact that physical locations have on digital commerce. Confidence in a brand and the ability to get products fulfilled on demand has been winning formula during the pandemic. I think it will only become more important as time passes.

Mohamed Amer
BrainTrust

The key is not to think and plan in silos. The store is integral to omnichannel retailing, and supply chains must support the entire network of value delivery. Retailers with a heavy store presence must turn these spaces into well-performing assets that contribute to customer value. Distributed networks are more resilient to shocks and provide more incredible speed and agility. Merchants must also plan and act across arbitrary channels and view the business from the customer’s perspective.

For larger and better-capitalized retailers, their opportunity is to transform faster and realize benefits sooner. Their Achilles heel is organizational inertia and a deep-seated legacy mindset. On the flip side and with a different risk profile, smaller competitors can pivot faster but lack the balance sheet to execute on intentions.

Ananda Chakravarty
BrainTrust

Stores will continue to be an important part of the fulfillment, with many stores already serving a dual role as a shopping place and mini-distribution center. Without a doubt, the store will continue to operate as a key part of customer experience(CX). However the supply strategies question warrants one of those “it depends” answers. Smaller chains will rely more on their stores, reducing centralization and operating to maximize existing levered assets. Larger chains will be more comfortable mapping process through stores and engaging across omnichannel via e-commerce DCs and sorting centers than just focusing on the store for supply chain needs. The more retailers can unite merchandising functions holistically, the better CX and easier it will be to offer integrated capabilities. Though I don’t believe this effort will be a key factor in the long run. Retailers will continue down this path at their own pace – sometimes limited by their margins, costs or organizational structure.

Natalie Walkley
BrainTrust

In logistics, you know that the more DCs you have in strategic locations, the faster and cheaper you can get your products to your consumers. By using stores as micro-fulfillment centers, retailers can increase the reach of their distribution network significantly and chisel away at two big items— proximity to customers (faster) and final-mile shipping costs (cheaper). But a major key to this is real-time inventory visibility across all channels and advanced routing logic to ensure that only cost-effective items can SFS and other items (i.e. big and bulky) still route to the closest DC.

Ralph Jacobson
Guest

Leveraging stores for multichannel fulfillment was a self-fulfilling prophecy only accelerated by COVID-19. This is a good thing for consumers but also for retailers in that it maximizes underutilized and unproductive store space.

Andrew Blatherwick
BrainTrust
With the huge changes taking place in retail this year, the rapid acceleration of online, BOPIS/click and collect and curbside pick-up are requiring retailers to pull on all their resources and renown resourcefulness to survive. The larger ones are in a much stronger position to be able to invest in the shift in supply chain and customer focus putting even more pressure on the rest. Undoubtedly, the supply chain and how the stores are utilized as part of this will be the defining factor of winners and losers, fortune favors the brave and it will be the brave retailers that invest in technology, transformation of their business and stores that will prosper. Visibility of inventory across the whole supply chain is vital to this success. Inventory solutions that are flexible with sufficient automation to enable retailers to be efficient, nimble and reactive to customer demand through different channels is key. It is a very exciting time because the new breed of retailers that master this period will become very successful delivering better service to customers… Read more »
Casey Craig
BrainTrust

While customers have moved to e-commerce as the first point of engagement with many brands, brick-and-mortar locations still serve an important role in customer satisfaction, proving to retailers the importance of establishing a strong omnichannel system. Curbside pickup is a great example: people can shop safely at home without sacrificing the convenience of immediate access at their local store.

With many various touchpoints for customers, collaboration across an organization is more important than ever. A shared mindset that prioritizes customer experience both online and in-person must shape the products and processes connecting retailers with consumers, engendering customer loyalty, and ultimately helping the business grow, even in uncertain times.

wpDiscuz
Braintrust
"Trying to return to pre-pandemic norms is fighting the future, and will have predictable results."
"All of the recommendations made make sense. Taken together, however, they amount to a complete overhaul — if not a complete rebuild — of the business system for many retailers"
"While customers have moved to e-commerce as the first point of engagement with many brands, brick-and-mortar locations still serve an important role in customer satisfaction."

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