How utilizing your store as a fulfillment center can improve the customer experience and drive revenue.
Now more than ever, retailers are feeling the pressure to measure up to international competitors like Amazon. However, many still rely on central distribution centers, causing orders to oftentimes travel thousands of miles to reach their destination. This takes unnecessary time and money spent on shipping, and when customers are expecting their packages quickly and affordably, you need an array of distribution tactics to fulfill those orders. The million-dollar question is this: how do you fulfill customer needs while improving efficiencies and cutting costs? The answer is to think local – and that’s where in-store fulfillment comes into play.
Ship from Store (SFS) is a fulfillment process where retailers use stock from their brick-and-mortar stores to fulfill orders. Fulfilling orders this way transforms the store itself into a virtual distribution hub. Last year, about one of every three brick-and-click, omnichannel retailers had adopted a ship-from-store program, according to Forrester Research. By utilizing an SFS delivery system, you can shrink delivery times to keep your customers coming back – increasing sales and improving your margins. In fact according to Forrester, Kohl’s was able to decrease shipping time per order by ½ day by bringing their stores into their omnichannel strategy.
Why Ship-from-Store is so important
When Amazon Prime was born over a decade ago, it created a world where consumers are less patient with high shipping costs and delivery times that exceed two days. Now 90% of consumers say that low or no shipping costs are important when making an online purchase decision. More than 80% have decided to cancel a purchase because of shipping charges – in fact 2/3 do this frequently. Consumers have even said that they would rather buy from an unknown retailer than a retailer that they knew and trusted, so long as they had free shipping.
Rethinking fulfillment and using shipping technologies to mold retail stores into separate, smaller distribution centers is imperative in today’s instant-everything world. Putting customer needs aside, utilizing stores as fulfillment centers also benefits retailers in many other ways, such as efficiently using up stock and preventing unprofitable stockholding, avoiding frustrating “out-of-stock” situations, decreasing overall shipping costs and driving revenue. For example, online sales at American Apparel have increased by 30% since they started using their stores as “backup fulfillment centers.” Furthermore, industry insiders see an overall sales increase of 10-40%: circulating inventory within all channels increases margins by 1-3% whilst reducing the likelihood of inventory markdowns by 10-15%.
Unfortunately, the hard reality is that shipping online orders costs money (whether consumers want it for free or not), and shipping in two days or less costs even more. Additionally, downward price pressures from marketplaces like Amazon and pure-play Internet-only retailers (that do not have the overhead cost of brick-and-mortar stores) are putting many retailers in a difficult place. That’s why shipping directly from your store can give you a competitive advantage.
Instead of thinking of your store plainly as a location where customers come to pick up their products, think of it as a pool of inventory that can also be used as a fulfillment center for shipping products to your customers. As former Macy’s executive Peter Sachse put it, “We’re no longer going to need fulfillment centers anymore. We’ve got 800 of them, and they’re called Macy’s stores.” Or, as former Gap CEO/Chairman, Glen Murphy commented, “Some people talk about Amazon with their 100 distribution centers, God bless them. We have 2,600 distribution centers.”
Best Buy and Dick’s Sporting Goods have enabled all of their respective 1,000+ and 600+ stores to ship online orders. Best Buy even reports having cut its average online delivery times by two days by doing so. Finish Line ships more than 50% of its online orders from its nearly 700 stores. And, as long ago as December of 2014, Lowe’s President and CEO reported that approximately 70% of their online orders were either picked up at a store or delivered by the store.
How to implement a Ship-from-Store strategy
1. Begin strategizing now, not later.
Online sales will continue to eat into in-store purchasing, placing pressure on brick-and-mortar stores to remain profitable. There is no other choice than to start thinking about how you can use your stores to fulfill orders as soon as possible.
2. Make sure your stores have the space.
In order to initiate a ship-from-store strategy, retailers need to evaluate how much space will be needed to turn existing aisles or backrooms into storage for online orders.
3. Find your best store locations to implement the strategy first.
Connecting consumer demand with inventory in the most flexible and cost-effective way is what ship-from-store is all about. Consider selecting locations closest to your best customers that will enable fast delivery, and if possible, allow customers to get their packages in 1-2 days. Remember, the most successful ship-from-store strategies have the capability to scale. A strategy that focuses on a single “locality” will be difficult to scale in other areas. Being able to identify a widespread but local need and having a model that adapts to each new market will be crucial.
4. Remember returns.
Return policies are very important to customers. Most consumers expect free and easy returns, and if they do not like your return policy, they may choose to shop elsewhere. A ship-from-store model can complicate the process. Make sure you determine whether items fulfilled in-store should be returned to stores or distribution centers and set clear policies for customers in terms of accepting returns in person at stores and/or via mail.
5. Check software capabilities.
A ship-from-store model is built on the foundation of complete inventory visibility and shipping system capabilities. You’ll need a dependable inventory management system (OMS) that integrates with a shipping software solution to not only track inventory, but to get your orders from the store, onto the truck and into your customers’ hands in the most quick and cost effective way possible. This step cannot be discounted and is worth immediate reevaluation of your current internal systems.
6. Test, test, test.
Don’t just implement something on a large-scale without testing the waters. Yes, ship-from-store initiatives resulted in higher sales, faster delivery times, easier inventory forecasting, improved margins and lower costs, but ship-from store is most fruitful for retailers that have tested it first. Success doesn’t come overnight.
As a retailer, you should carefully consider the costs and benefits of in-store fulfillment. The time is now to evaluate your current distribution operations, IT capabilities and store proficiencies to see how you can implement a successful ship-from-store model. Maintain an omnichannel experience by staying consistent, and keep your consumers’ expectations – and your profits – high.
Want to learn from the pros? ProShip prides itself in helping today’s top retailers with their ship-from-store models and know exactly how to cater to your unique needs. Contact one of our shipping experts today!