Fulfilling Strategy

For online orders, multichannel retailers find shipping from stores can save the sale

A retailer’s ability to cut costs and operate more efficiently without compromising product selection, value, service and most importantly customer satisfaction is strategic to survival in any economy. A bad economy just makes it more challenging.

So retailers should take a hard look at one of the biggest expenses and challenges all merchants deal with on a daily basis—managing corporate-wide inventory—and how to make it more available for consumer purchase and direct fulfillment, and how to seamlessly integrate it across all sales channels.

This strategy, in fact, has already led many retailers, including Jones Apparel Group Inc., The Orvis Company Inc. and Systemax Inc.’s CompUSA, to embrace an e-commerce and in-store collaboration business model—a model that many leading retailers have implemented but remain mum over because of the competitive advantage it offers.

Not to be confused with in-store pick-up programs, the e-commerce and in-store business model transparently makes in-store inventory available for sale online and fulfills orders from the best available store when the primary warehouse is out of stock.

Faster access to products

Jones Apparel Group, the holding company for popular apparel and footwear brands including Jones New York, Nine West, Anne Klein, Bandolino, and Easy Spirit, launched this collaborative model in conjunction with a comprehensive online strategy to give consumers faster and easier access to products not only across its brands but also across channels.

More than 600 Nine West and Jones New York stores have integrated their retail inventory with their e-commerce sites to make in-store inventory available for sale online, while making these same stores capable of fulfilling online orders direct to the consumer.

“Tough economic times require thinking outside the box,” says Ron Offir, Jones Apparel’s president of e-commerce. “When we reviewed online sales activity, we discovered we were losing sales when we sold out of a product, or the size or color wasn’t available in our direct-to-consumer warehouse. We also discovered that our stores could have fulfilled these orders. Not only were we losing revenue and disappointing our customers, we also weren’t capturing true product demand, which is critical for our web forecasting group.”

Stand-alone channels with silos of channel-specific strategies, information, inventory and fulfillment processes are no longer practical, especially considering the proliferation of technology that promises to make consumer purchasing nearly an anytime/anywhere shopping experience.

Taking a proven concept like drop-shipping and applying it to a cross-channel strategy that leverages known internal resources for fulfillment—bricks-and-mortar store inventory and personnel—allows retailers to optimize costly resources across multiple channels, driving down overall inventory carrying costs, driving up revenue and improving product availability regardless of the consumer’s point of purchase.

Order online, ship from stores

For outdoor gear and apparel retailer Orvis, economics played a big role in its decision to roll out an e-commerce and in-store collaboration business model more than eighteen months ago.

“We recognized that we had 40 mini-warehouses holding lots of dollars worth of product all over the country,” says Brad Wolansky, vice president of e-commerce. “It didn’t make sense to isolate it for a specific sales channel. Through in-house-developed technology, we made corporate-wide inventory available through the direct-to-consumer sales channel as well as to our stores. It’s a great way to better utilize the value of our inventory, and better service our customers’ needs.”

Wolansky also says he believes the business model works for any retailer regardless of average order value as long as stores can handle the fulfillment process with the same amount of consistency as the warehouse.

Terry Perrin, executive vice president of retail at electronics retailer CompUSA, agrees. “The business model makes perfect sense, but it is also imperative that the stores have the proper shipping facilities, materials and training to ensure the customer receives the same fulfillment quality as if the order was shipped directly from the distribution center,” he says.

CompUSA was experiencing out-of-stock conditions in its warehouse for products it no longer planned to carry in stores, Perrin says. Normally, it would ship those end-of-life store products back to the warehouse for eventual sale online. Now it can save the shipping costs associated with returning this stock to its distribution center.

Jones Apparel Group and CompUSA have implemented StoreNet Manager from supply chain solutions provider VendorNet to integrate their online and bricks-and-mortar sales channels. Both retailers cited fast development time as a primary reason for selecting a packaged solution versus in-house development.

How collaboration works

E-commerce and in-store collaboration technology integrates with a retailer’s e-commerce and order management system to electronically pass all e-commerce orders that cannot be fulfilled by the direct-to-consumer warehouse to the best available store. Through a web-based portal, store personnel print pick lists, packing slips and shipping labels, then pick and pack the items and stage the order for pickup by the shipping carrier.

The technology also records scanned confirmations of carrier pickups, and sends shipping transaction data with tracking numbers back to the order management system, triggering a charge to the consumer. Every morning, the collaboration system sends updated store inventory counts, for individual stores as well as for the entire store chain and warehouses (minus safety stock levels, newly allocated orders, etc.) to the e-commerce system.

Retailers expressed a common thread in their reason for implementing e-commerce and in-store collaboration. Orvis saw a decrease in lost demand and an increase in direct-to-consumer orders that could be fulfilled using store inventory, Wolansky says. Those orders would have been lost if Orvis had based its inventory availability only on its Roanoke, Va., warehouse.

Offir says Jones Apparel can keep styles moving through the entire lifecycle of a product, sell down merchandise faster by taking advantage of seasonal pricing versus end-of-season discounts, and capture true demand for an item. Stores get credit for the sales, and the retailer can dynamically take stores in and out of the program, allowing it to take advantage of pockets of inventory or stores with less foot traffic that can more easily accommodate online order fulfillment.

For CompUSA, the collaboration strategy plays directly into the new and improved CompUSA model of “you buy it today, it ships today.” Perrin says cross-channel collaboration minimizes back-orders and lost sales, and eliminates shipping costs and the need to return products no longer planned for store sales to the distribution center. It also improves the opportunity to sell down products before deep discounts are necessary to relieve inventory from stores.

True bottom line results indicate e-commerce and in-store collaboration boosts sales and reduces inventory carrying costs—economies no multichannel retailers can afford to ignore. What used to be a well-guarded advantage leveraged by a relatively small number of retailers is starting to hit the retail mainstream. It’s time for positive headlines.