Gaining a Supply Chain Edge

Ship-from-Store: Show Me the Money ... and Show me the Customers

Okay, so my blog title quotes from the movie Jerry Maguire, which was released over 15 years ago. But I still hear people say it from time to time.

And it's particularly relevant when talking about the latest concept in customer fulfillment: ship-from-store. What is it? What are the advantages? How is it bringing in revenue?

Retailers and consumer products manufacturers are always looking for new ways to compete with Amazon. And some companies are beginning to take omnichannel strategy to the next level through store fulfillment. One exciting new store fulfillment option -- currently adopted by companies such as Walmart, Best Buy and Gap -- is to ship directly from the store to the customer.

Why provide ship-from-store capabilities?

  1. Improved delivery time. Delivery to customers is faster, especially for customers further away from distribution centers. Faster delivery leads to higher revenue.
  2. Fewer out-of-stock incidents flagged to customers.
  3. Decreased shipping costs for most customers.
  4. Increased margin due to markdown avoidance.
  5. Reduced need to move/transfer inventory between stores, distribution centers and fulfillment centers.
  6. Lower additional capital expenditures for increasing fulfillment center capacity.
  7. Increased ability to meet peak season online demand.

Overall, store fulfillment is still very much in its infancy. And the loose definition of store fulfillment is making this even more difficult.

Companies with this capability generally fall into two categories; pilots and early production stage. The former aren't really collecting or reporting reliable revenue and cost numbers. The latter are generally in the process of ramping up to full deployment, as well as evolving through the stages of store fulfillment. These companies typically hesitate to release any performance data due to strategic reasons or comfort factor due to a limited history. So unfortunately, there is not a lot of reliable data available.

What I have seen on the revenue side has generally been expressed as an increase in online sales due to store fulfillment. There have been reported increases ranging from 10-40%, and margin increases are being reported at 1-3% due to markdown avoidance.

I also continue to see evidence of increased store traffic from store fulfillment, but this comes more from click-and-collect.  Likewise, as a result of store fulfillment, we are seeing reports of up to 60% increases in sales to omnichannel customers.

To help accomplish these capabilities and for robust store fulfillment roll out, we are beginning to see a significant trend toward combining distribution centers with fulfillment centers.

If you're looking for new strategies to better compete in this market, are you ready to put your money where your mouth is? Would you, or do you, use ship-from-store as a fulfillment strategy?

Best Regards,

Jim

TAGS: Supply Chain
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