June 3, 2013, 3:19 PM

Repackaging stores

(Page 2 of 2)

Now Wal-Mart wants to go a step further. About two years ago the retailer began testing its Ship from Store program. Wal-Mart views the program as a cost-effective way to deliver to many consumers quickly. The reason is simple: two-thirds of the U.S. population lives within five miles of one of Wal-Mart's more than 4,000 U.S. stores, says Joel Anderson, president and CEO, Walmart.com U.S. "Ship from Store will enable us to do same-day and next-day delivery at a low cost to us and offer convenient and expedient delivery to the customer," he says.

He says Wal-Mart has the experience to pull it off. "For 50 years we've been picking from the back of the store and putting items on the shelf," Anderson says. "Taking from the truck, putting items on shelves: Ship from Store is no different, except that you're putting the item into a box."

The program has limits, though. Neil Ashe, president and CEO of Wal-Mart Global eCommerce, says Wal-Mart will ship only from stores items it stocks in stores. That's a far smaller number of SKUs than it sells online. Ashe says the typical Wal-Mart store holds about 100,000 SKUs, compared with nearly 2 million offered on Walmart.com, of which some 1.5 million are sold by the half-dozen outside retailers that sell on the Wal-Mart site. "So not everything you're going to buy online is going to be available in your store," he says.

What's more, he says, Wal-Mart will place inventory in stores based on where online consumers order those items, perhaps ski apparel in Colorado and sandals in Florida. "The most important part of this fulfillment network is having the right item in the right place for the right customer at the right time," he says. "So we won't put that inventory in that store unless we know we're going to turn that inventory through this program. So it's actually an incredibly efficient way to optimize the network."

Wal-Mart may not ship from all its 4,000 U.S. stores, and it may not guarantee same-day delivery on slower-moving products. "So Ship from Store may be same-day, but isn't necessarily same-day," Ashe says.

The Finish Line Inc. is "all in" when it comes to fulfilling web items from stores, says Sam Sato, president of The Finish Line brand. That's because the athletic shoe and apparel chain started shipping web orders from stores more than 12 years ago, and now does so from each of its 657 locations.

Those stores fulfill more than half of FinishLine.com's orders, he says, with its Indianapolis distribution center supplying the stores and handling the rest of the web orders. On a typical day, a store will process more than a dozen web orders, Sato says.

Here's how that fulfillment process works: When a consumer places an online order, it goes to a specific store—the store is selected according to a combination of store stock levels and proximity to the consumer's shipping address—via the point-of-sale system, which records the reduced inventory. A store employee picks that item from the shelf, packs it, prints a shipping label and hands the package off to a delivery carrier. The retailer is working to upgrade all of its technology, Sato notes, and that effort will include better inventory forecasting tools so that it can better predict what web items will ship from particular stores at particular times.

Sato would not specify how much it costs to fulfill items from stores—or the sales bump it brings—but the chain can boast of a 25.1% increase in e-commerce revenue for the fiscal year ended March 2. That compares with a 5.1% increase in total sales and a 5.9% increase in comparable-store sales.

He says the cost of shipping from stores is similar to shipping from its warehouse. "It depends on the number of units per order and whether a single store can fulfill the entire order versus multiple stores," he says. "There is an initial cost to ship product from our distribution center to our stores. However, this cost has a much lower impact on us versus a dissatisfied customer or taking a markdown."

Fulfilling from stores also lets retailers test product lines, as American Apparel Inc. has learned.

It has fulfilled web orders from stores for two years, says Ryan Holiday, director of marketing. When an order is placed online for a product out of stock at the retailer's e-commerce fulfillment center, the order is routed to the store nearest the customer that has the item in stock.

The apparel chain also uses this system to fulfill web orders of products it is testing. "These products aren't made in vast quantities and the inventory may be spread out across the stores," he says. "These sort of unique or exclusive products are definitely well suited for the store distribution model because we can display them on the store floor and online without having to sit on large amounts of them."

Similarly, Peter Glenn has more confidence in trying out new product lines because it knows that even if the product doesn't sell well locally, web shoppers elsewhere may want it. Having the ability to fulfill those orders from store stock increases the chance the retailer can make a profit on them. That's yet another reason why it's a fair bet more retailers will expand ship-from-store capabilities. l



Tips for fulfilling online orders from stores
  • Have space not only for shipping out orders, but for returns.
  • Have standard packaging for all web orders, including those sent from warehouses. Orders from stores should not look like they come from shelves or have been pawed at by shoppers.
  • If a store is short-staffed, let the store manager decline to fulfill web orders that day.

Source: Nikki Baird, Retail Systems Research LLC

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