Will Stores Become Warehouses in the Omnichannel Future?
A host of chains are now expanding their capacity to fulfill online orders from stores. The benefits include more quickly distributing inventory that had traditionally sat in a warehouse, leveraging store personnel, and testing products earlier with actual buyers.
In February, Macy’s announced it was expanding online fulfillment from 292 stores to 500 by the close of 2013 as part of its omnichannel push. It currently has a total of 840 Macy’s and Bloomingdale’s locations.
"We’re finding that customers don’t really care from where we pull the goods, as long as we fill the order accurately and the delivery is timely," said Karen Hoguet, Macy’s CFO, in February on her firm’s fourth-quarter conference call. "We’ve built algorithms to help us determine from where to pull the inventory, and we are learning more each day about how we need to refine these formulas."
She added, "We expect these fulfillment locations will be key to offering faster and even same-day delivery, and also will enable the customer to buy online and pick up in-store."
The challenges come when an online order delivery leads to out of stocks at the store level. Readdressing commission structures is also an issue as many associates only see the website stealing sales from them.
"It’s totally an issue," said Jason Merrick, director of e-commerce for Peter Glenn Ski and Sports, which operates 11 stores in Florida, Georgia and Virginia, in a statement. "We measure how much each store ships and communicate those metrics to the stores." (Mr. Merrick will discuss the complexities of e-commerce fulfillment at the Internet Retailer Conference in Chicago in early June.)
Algorithms help Peter Glenn’s web operation pull product from stores where the product is selling more slowly and avoid fulfilling from a store where the product is moving fast. Technology is also used to avoid the need for phone calls, faxes and having store associates constantly re-key web transfers into the POS system.
Peter Glenn employs one staffer at each store to fulfill web orders, regularly keeps store managers up to date on the latest fulfillment techniques, and bases store managers’ bonuses in part on the accuracy of shipments from stores. Its headquarters’ web team monitors open orders.
- Macy’s Fourth-Quarter Conference Call – Seeking Alpha
- Macy’s, Inc. to Expand Arizona Fulfillment Center – Macy’s
- Stores that fulfill web orders – Internet Retailer
- New Order Fulfillment Software Helped Fatten Macy’s Holiday Margins – The Wall Street Journal (sub. required)
- Macy’s Regroups in Warehouse Wars – The Wall Street Journal (sub. required)
Will brick and mortar retailers turn stores into fulfillment centers ala Macy’s in the future? Will pulling inventory from stores become a meaningful competitive advantage for brick & mortar operators in the years ahead?