The downsides of in-store fulfillment

If you’ve shopped in a brick-and-mortar store in recent months, you may have seen store employees acting strangely. Instead of restocking shelves or helping customers find goods, they’re on the floor picking inventory themselves, filling carts with items for e-commerce orders.

The trend is the latest way that exploding e-commerce demand has rocked the world of retail.

The advantages of filling online orders from store shelves are clear—retailers can save money by offering curbside pickup or same-day delivery to consumers who live nearby, instead of shipping those orders from distant warehouses. They also stand to realize major cost savings by serving both store and online customers from a single pool of inventory.

However, industry experts warn that there are drawbacks to the practice as well. For one thing, there’s the potential for traffic jams when consumers and employees all try to pick from the same inventory at once. For another, there’s the risk of alienating shoppers who may find themselves competing with store employees for items that are in short supply. And that’s to say nothing of the cost implications of devoting expensive urban real estate to tasks usually performed in warehouses in low-rent areas. Or the need to retrain workers for specialized shipping operations.

All this goes to say that as appealing as shifting to a store-based fulfillment may sound, it’s not a decision to be taken lightly. There’s more to it than simply having employees pivot from placing shelf goods into shopping carts to placing shelf goods into shipping cartons. In reality, it’s a complex calculation that requires retailers to weigh a host of sometimes competing factors that include real estate costs, training needs, and in-store shoppers’ experiences.

PRESERVING THE IN-STORE EXPERIENCE

It’s an issue Michele Dupré sees retailers struggle with every day. Dupré, who is group vice president at Verizon Enterprise Solutions with responsibility for enterprise customers in the retail, hospitality/travel, and distribution sectors, says companies from across the retail landscape are combing through their market data and statistics to determine whether it makes sense to perform e-commerce fulfillment in their stores.

What makes the decision so difficult, Dupré says, is that it forces retailers to balance the competing needs of on-site shoppers and digital shoppers. “Retailers are weighing the current obstacles, because the last thing you want to do is provide a bad experience, so the shopper doesn’t engage with the brand and you lose their business.”

Given the complexities involved, it’s no surprise that the retail industry has yet to settle on a single operating model, she adds. “It’s an ever-evolving and changing environment, as the sector continues to morph into co-existing digital and physical operations.”

SELECTIVE SERVICES

Of course, in-store fulfillment doesn’t have to be an “all or nothing” endeavor. One way to capture the savings of in-store fulfillment while avoiding clashes with in-store shoppers is to roll out the practice in only a few of a retailer’s stores within a given city, says Joe Dunlap, managing director for supply chain advisory with the real estate services and investment firm CBRE Group Inc.

“If a retailer has four, five, or six facilities in a given metro [area], it can still provide next-day time-in-transit service to the broader market by doing e-commerce fulfillment from a single location,” Dunlap says. “Maybe it’s overkill to ship from every store; you just need one in a given market.”

Another option might be to limit the types of e-commerce fulfillment services provided from a given brick-and-mortar outlet. For example, a retailer might decide to make “buy online/pick up from store” (BOPIS) service available at a given site but not the more ambitious ship-from-store service, which requires more employee involvement and training. Still other possibilities include shifting e-commerce activities to a nearby microfulfillment center (MFC) or to a “dark store” (one without live shoppers).

As for which strategies are gaining the most traction, the answer is not yet clear. “It’s still a little bit early to see trends here because property data doesn’t distinguish between those uses yet—for pure walk-in, BOPIS, or buy online/ship from store,” Dunlap says. “[Retailers are all performing] ongoing perpetual analysis as the infrastructure changes, volumes change, and consumer behavior adapts to these new shopping patterns.”

NO SILVER BULLET

As retailers continue to struggle with this issue, they’re looking to both high-tech and low-tech solutions, according to Jim Barnes, CEO of supply chain consulting and IT services firm enVista. On the low-tech side, the solutions can be as simple as scheduling e-commerce fulfillment work for off-peak times such as early mornings and late nights to minimize inconvenience to shoppers. “Stores don’t want … their sales associates to pick food during peak shopping times, when they might be competing with in-store shoppers for that last container of Chobani yogurt,” he says.

As for technology-based solutions, retailers are investing in handhelds and tablets as well as exploring their automation options—although progress on that front has been slow to date. For example, according to a white paper from enVista titled CMOs and CFOs Take Control: Don’t Let Your Ship From Store Strategy Break the Bank, less than 25 percent of retailers have well-defined, automated processes for ship from store.

Still, when it comes to multistep operations like ship from store, simply upgrading your technology is no silver bullet, Barnes warns. It’s more complicated than swapping out a basic order management system (OMS) for a “light” warehouse management system (WMS), he says.

“What you don’t want to do is think you can turn on your WMS and … be able to ship from store, because there are so many other variables,” Barnes adds. By way of example, he points to the need to train employees on how to package and ship delicate goods like lamps or glassware.

A LONG ROAD AHEAD

Launching omnichannel fulfillment operations within a brick-and-mortar store remains an enticing option for retailers caught between skyrocketing e-commerce demand and the need to keep shipping costs in check. But it also requires them to meet the sometimes competing needs of in-store and online shoppers. And when it comes to the question of how best to do that, industry analysts warn there’s no clear path forward yet.

“There is overlap between pure industrial and pure retail; there’s a gray space in between brick and mortar, pick up in store, and ship from store,” CBRE’s Dunlap says. “There are blurred lines between what’s an industrial space and what’s a retail space. There’s still a long road ahead.”