Will ship from store be retailers' last mile solution?
Chicago— Bricks and mortar is dead, long live bricks and mortar! That was the message coming from retailers at IRCE this week. The store is increasingly a critical part of an online or omnichannel strategy, particularly when it comes to the last mile in the fulfillment process.
"The store is an important cog in the wheel," said Kevin Lyons, executive VP e-commerce, hhgregg (NYSE:HHG). Increasingly, the store is being relegated to a link in the supply chain as retailers expand pick-up and delivery options.
Shop online and ship to store is an option growing in popularity with shoppers, and retailers are rapidly discovering that shipping from store has real benefits to the customer experience and offers a return on the real estate investment.
"The return on square footage in retail brick and mortar is never coming back," said Lyons. "The importance of maximizing that square footage means you will have to make some tough choices."
At hhgregg, that means carving space away from underperforming product categories and reallocating it in both warehouses and stores. The retailer has added transactional communication tailored to fulfillment and implemented scorecards based on volume and effectiveness. Back rooms are organized to mirror a DC operation and, on the shopper-facing side, hhgregg added mobile check-in for buy-online-pick-up-in-store orders.
Shoppers receive free shipping on orders more than $50, and in CE, most items qualify, so shortening that last mile or offering in-store pickup yields substantial cost savings, according to Lyons.
When specialty retailer Peter Glenn Ski & Sports began shipping orders from stores in 2005, e-commerce was just 2 percent to 3 percent of sales. Today e-commerce is as much as 15 times that of stores, according to Jason Merrick, director of e-commerce.
That's not the only thing that's changed.
Originally, store fulfillment consisted of calling one of Peter Glenn's 11 stores, opening the door to a host of errors (once an item was shipped with candy in a pocket). Over time, better access to accurate inventory and support to stores has not only improved the process, but reduced end-of-season merchandise markdowns.
Implementing ship from store requires new processes and back-end technology, but it is clearly a promising solution to creating not just an omnichannel experience for shoppers, but offering a solid return on investment that also traverses that critical last mile.
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