Ship-from-store: 6 benefits & challenges.

The benefits of implementing in-store fulfilment of online orders.

Ship-from-store is perhaps the pinnacle of the omnichannel mindset. By turning physical stores into mini-distribution centres (especially in high-density areas) retailers are able to fulfil more orders. This also allows them to enable same-day shipping on a large scale, using local (and often more sustainable) shipping methods.

Many brands & retailers have been debating what true omnichannel means to their brands, but few have really taken action in combining online & offline sales channels to create the best experience for their customers. Recently, however, things seem to have changed and retailers are forced into changing quickly, as their shops were (partially) closed down due to COVID-19.

Even without the forced (partial) closing down of physical locations, an increasing number of retailers are recognizing how their offline presence is giving them a unique edge over their digital-only competitors. Perhaps best exemplifying this trend is the rise of Click & Collect, with some retailers reporting in-store pick-ups overtaking their home delivery volumes.

Sending online orders to offline stores is just the start. Innovative companies like G-Star and Nordstrom are taking omnichannel logistics to another level by shipping online orders from their retail stores. In this article, I have explored some of the benefits of shipping from stores, as well as a few challenges associated with this new approach to the retail supply chain.

Benefits

1. Speed: rapid delivery with local carriers.

Of course, you can always use a regular (inter)national carrier to ship online orders from a store. Just as you would ship from your central warehouse. But there are other options. With stores often being close to population centres, the in-store stock has already travelled most of its way to the end consumer. This creates the unique opportunity to ship with local carriers instead, speeding up the shipping process exponentially. Within urban areas especially, delivery within the hour is highly attainable. Moreover, by employing bike delivery carriers, the environmental impact of each delivery is significantly reduced. Alternatively, one could use a private fleet of vehicles on a local scale. In each case, this localized approach makes same-day delivery surprisingly cost-efficient, with shipping fees that are similar to those charged for regular domestic shipments.

2. Fewer stock mutations, fewer markdowns.

It is very common for products to sell well in one store while staying virtually untouched in the other. Usually, this ‘dormant’ stock will be relocated to stores that will be able to sell it, or else it will be discounted. Having the combined stock from all stores available to online consumers reduces this need for relocation or markdown. Dormant stock will simply be used to fulfil online orders. Equally important: when an item is out-of-stock in one retail location the “single view of the stock” needed to ship-from-store means customers or employees can easily order online from another location. This essentially ‘saves the sale’, as you can still offer the consumer the product that they want. Also, ship-from-store means retailers require less stock to be separately reserved at a central warehouse for online sales.

3. Bypassing customs.

For those operating on a global scale, customs often proves to be a challenge. Shipping orders outside the EU borders involves customs forms that take precious time to fill out. More importantly, your customer is often faced with unexpected customs fees and delays. This explains why, in countries where they have no local warehouses, global retailers are increasingly turning to ship-from-store, to circumvent customs on each individual order.

4. Creating a true omnichannel mindset.

For in-store retail employees, e-commerce took some getting used to. Perhaps it still does, with sales flowing away from the shop floors, many find it hard to embrace their employer’s online activities. By having your employees fulfil your online orders, you potentially take away some of these feelings. It directly connects them to online consumers and paves the way for a truly omnichannel mindset.

5. Online growth with existing physical infrastructure.

Online retail has not finished growing yet. Far from it. Predictions for 2020 (from before COVID-19) were that e-commerce is expected to represent about a third of all retail sales. This means you will, sooner or later, run out of space in your existing warehouse(s). By fulfilling part of your online volume from your stores you, at least temporarily, take the pressure off your warehouse infrastructure.

6. Increased ability to meet ‘peak season’ online demand.

With most brands & retailers running “peak season” numbers every day at the moment, ship-from-store offers the opportunity to better meet demand in times like these (or the regular peak season in the future). With as much as half of annual online sales being made in a two-month window, your warehouses are often running at maximum capacity. Given that your warehouse walls are not made of rubber, and peaks in online sales are highly unpredictable, the ability to be flexible could prove to be vital.

Challenges

1. Creating single-view-of-the- stock.

The single largest challenge in implementing a ship-from-store strategy is creating a “single view of the stock”. In other words: up-to-date stock information on every retail location, on every single product. Creating this overview involves the linking together of all your inventory databases, as well as real-time tracking of every mutation. E.g. every in-store sale needs to be registered immediately.

2. Designating orders to stores.

When using stores to ship items on a local level, for example using bike delivery carriers, the decision of which store ships which order is easy: the customer makes it. Based on their location, and the availability of the product at a certain location nearby, a customer will decide whether or not to purchase. It gets more complicated when you use stores to fulfil domestic or even international shipments. In this case, a distributed order management system is needed, which allocates orders to stores based on a complex set of variables. To reduce errors, a store must be free to deny an order. Also, when allocating an order consisting of multiple products, the tool must seek to offer the order to a store that is carrying the complete contents of the shopping cart. Even though this technology is making its way into modern warehouse management systems (WMS), a lot of retailers are still faced with building custom solutions.

3. In-store infrastructure.

Successful in-store fulfilment requires a certain infrastructure, both physical and digital. Firstly, each store needs access to the distributed order management system to see if any orders are allocated to them. Once accepted, employees need a tool to pick orders. A traditional warehouse terminal can be used, but ‘prosumer’ solutions like a tablet or smartphone could also be considered. Once picked, employees must be able to print shipping labels and arrange for pick-up. This requires delivery management software connected to a thermal label printer. Alternatively, shipping labels can also be printed with packing slips, which double as a pick-list. Finally, stores must be equipped with solid packaging materials.

4. Training employees

Picking and packing online orders is different from selling in-store. While it’s no rocket science, employees must still be properly trained. This includes a protocol for picking, double-checking order content, and correctly packaging orders for shipment. (If you’d like to start this now: try to plan ahead for the real holiday season, when both online and offline sales are peaking at the same time).

5. Making carrier agreements.

To ship-from-store, you need a carrier to pick up your orders. In most cases, you can rely on your regular carrier(s) to do so. Just be aware that pick-ups at multiple locations, instead of just your centralized warehouse might impact shipping fees. For this reason, one could also aim for a localized approach, in which stores fulfil online orders for the surrounding city/region. In each case, a multi-carrier approach is advisable, ensuring you are able to use the best (hyper)local carriers that are available in each of your regions.

6. Compensating the right people

Many retailers struggle with compensating the right people for the sales made online. Especially when a franchise structure is involved or online and offline retail are separate entities within the company. So before you roll out a ship-from-store strategy, think about how your individual stores benefit from fulfilling online orders. Perhaps even re-evaluate the individual bonuses you give your sales staff. Similarly, determine if you want stores to share in the costs of the ship-from-store concept as well.

Conclusion

Forced by COVID-19 or not, ship-from-store has great advantages for brands & retailers. By shipping orders directly from stores, they are able to offer same-day delivery on a grand scale, giving them a unique advantage over competitors and truly using their physical stores as part of their omnichannel strategies. Last but not least, ship-from-store might be one of the easiest ways to make e-commerce more sustainable (but more about that in another article).

Originally written & published by Luke Theissling in May 2020