May 16, 2013, 9:41 AM

Fulfilling web orders from stores can be costly, but worth it

It costs 30% more for Peter Glenn Ski and Sports than shipping from a warehouse.

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Fulfilling a web item from a warehouse costs on average about 30% less than shipping that product from one of the 13 retail stores operated by Peter Glenn Ski and Sports, says Jason Merrick, the chain’s director of e-commerce.

“But it’s worth the extra expense, if the tradeoff is losing the sale,” he says. “If you don’t have [a product], you’ve created the worst customer experience.”

Retailers that fulfill from stores—the topic of a story in the upcoming June issue of Internet Retailer magazine—do so for a variety of reasons.

Merchants that operate stores want to leverage the inventory they have in those stores to compete with Amazon.com Inc., the leading e-retailer in North America and virtually everyone’s direct or indirect competitor. This is especially true as Amazon moves inventory closer to consumers so it can delivery quickly; the leading e-retailer will have 54 distribution centers spread across the United States by the holiday season, up from 46 now, according to e-commerce service provider ChannelAdvisor Corp. Executives of Wal-Mart Stores Inc. have emphasized that their 4,000 stores give them lots of inventory close to consumers. Aiming to use that inventory to compete with online retailers like Amazon, Wal-Mart now fulfills web orders from 35 stores, with plans for 50 total later this year, using FedEx Corp. and other carriers.

Retailers also don’t want to frustrate a potentially loyal shopper—and lose a sale—by making them wait for items, especially slower-moving products more likely to be out of stock in a given store. That holds especially true for apparel retailers, dealing with fast-moving trends and meeting consumers’ needs for specific styles, cuts and colors. “In fashion, it seems like a slam dunk,” says Nikki Baird, managing partner of research and advisory firm Retail Systems Research, of fulfilling from stores. “It doesn’t take that much space, unless you are doing a huge volume, in which case ask yourself, ‘Should I have a fulfillment center?’”

But the costs and hassles can be significant.

Peter Glenn, which sells skis, snowboards, shoes and related items, began fulfilling orders from multiple stores in 2005, just before e-commerce became a company priority, Merrick says. Back then, the fulfillment process involved calling a store to see if it had the product, then faxing the order to the store, where staff re-keyed it into the point-of-sale system. "It was inefficient and a pain for the stores, so was costing us money and morale,” Merrick says.

In 2007, the chain moved to home-grown order-management software that integrates with the retailer’s store checkout system, he says. “By going from a manual process to a more automated one we were able to cut costs while increasing orders,” he says, declining to be more specific.

Still, an estimate from OrderDynamics Corp., whose software helps retailers fulfill web items from stores, gives a glimpse of the possible price: A retailer with 75 locations can expect to pay at least $100,000 to implement such ship-from-store technology.

Read more about the benefits and costs of fulfilling web items from stores in the upcoming June issue of Internet Retailer.

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