What Is Store Fulfillment and Why Is it Strategic?
Posted by Julia Morrissey on May 26, 2022
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McKinsey recently found that more than 90% of shoppers expect free two to three-day shipping, and 30% expect same-day delivery. For retail brands to be able to meet these expectations, omnichannel delivery has to be top of mind.
Store fulfillment is an important piece of the puzzle. It’s a key driver in customer retention and satisfaction and provides valuable opportunities for direct-to-consumer retail brands today.
In this post, we discuss what store fulfillment is and how it can help your brand adapt to changing consumer demands.
Store fulfillment is an omnichannel retail strategy that enables brands to fulfill and ship orders from their brick-and-mortar stores.
Today’s customers expect a new level of flexibility and convenience. They want to receive and return products quickly, inexpensively, and also sustainably.
Store fulfillment allows brands to offer curbside pickup, buy online pickup in-store (BOPIS), also called click and collect, and buy online return in-store (BORIS). Additionally, brands can leverage their physical locations and inventory to ship-from-store, fulfilling online orders in-store and sending to nearby customers rather than using far away fulfillment centers.
Improving your brand’s fulfillment practices can provide significant value. Below, we discuss the advantages of store fulfillment.
It is no surprise, convenient fulfillment options were top of the list in our recent customer expectation survey—68% of consumers expect to be able to buy in one store and pick up from another. And 67% expect to be able to purchase something currently unavailable, go home, and have it shipped to them from the store. Creating convenient, and therefore satisfying, customer interactions is a must for retailers. Fail to deliver, and as many as 91% of customers will leave your brand.
Providing shoppers with convenient, genuinely delightful shopping experiences means they’re more likely to stick with you (and spend with you). After all, a lifetime customer is a profitable customer. It’s a true win-win. To offer real value and truly satisfy customers, brands must lean into what customers want—convenient, modern store fulfillment solutions.
While we wish it weren’t true, returns will forever be a reality of retail. Our survey data revealed 51% of consumers expect store associates to be able to return or exchange an online order in-store without a receipt, and 43% expect to be able to return or exchange an item in any of a brand’s stores.
Omnichannel returns offer the friction-free experience your customers expect, and utilizing your store for returns also provides opportunity.
In-store returns help to drive foot traffic to your brick-and-mortar locations so you can turn a return scenario into a selling opportunity. They also allow you to quickly capture returns and add product back into your inventory to resell it in-store at a profit. Even if the product is an online exclusive, you can utilize ship-from-store to ship it out to a nearby customer who orders the product.
Fulfilling online orders with in-store inventory, saves both your brand and the customer time and money.
Improving last mile delivery is also a key way to make your shipping practices more sustainable. You cut down on transit time and fuel when you ship from locations closest to your customers or offer BOPIS. There’s also no need to have strategically placed warehouses when you have a distributed fleet of physical retail locations.
Huge retailers are making headlines by turning their stores into distribution centers. Marine Layer, a NewStore customer and eco-friendly American-made brand, ships on average 15% of online orders This allows Marine Layer to ship orders with a local touch, which is of the utmost importance to the neighborhood brand. (Read the full Marine Layer case study here.)
So, if it works for them, will store fulfillment work for you? To find the answer, you first need to define a couple of things.
Whether it’s boosting sales or profitability, reducing time to customer or non-productive inventory, or just boosting gross margin return on inventory investment. Identifying your aims must come before upscaling your fulfillment. What you can do and what you should do will differ.
Next, decide where you want to get to. Is there a benchmark figure for store fulfillment orders you want to reach? Do you plan to focus on customer retention above all else, and are you willing to forfeit customer acquisition in the short-term to do so?
If your brand is considering embarking on a store fulfillment journey, here are four principles to follow to ensure you are successful.
Leveraging stores to satisfy demand is not a new retail concept. However, there has been one consistent struggle with the practice—channel conflict. The age-old questions about store fulfillment always come up: “Who gets credit for the sale?” “Who absorbs payroll?” “What is the store associate’s role?”
These questions have all been debated in companies that have implemented store fulfillment. Why? Because it is a change and it requires people to think about it differently.
What we can learn from others is to be more channel-agnostic and customer-centric. A sale is a sale. Now is the time to mean it when you say it. If there is inventory available in your enterprise, it has never been more important than it is today to sell every last unit.
Fulfillment programs have failed in the past because of channel conflict and internal misalignment. There isn’t a place for that today as businesses look for ways to stay afloat. Bring down the silos in your organization so you can sell to your customer regardless of where the demand is generated. It’s not about what channel drove the sale, it’s that you made the sale. That’s your North Star right now when every sale counts.
It’s critical to set both short-term and long-term goals for your business. But, know that both of these may very well change and be okay with that.
Today your plan might be to light up curbside pickup—your customers need an efficient and maybe even contactless way to collect their orders. In six months from now, you may be focused on liquidation and markdown avoidance—moving aged inventory so that full-price sell-throughs are not lost. Both are strategic and the benefits of doing both are plentiful.
As we navigate evolving customer behaviors, your reasons may evolve. In fact, they most likely will. What comes to mind with regard to store fulfillment is in-transit time and the number of shipping zones you have to cross to lower your costs. Or, perhaps a reserve online versus a buy online model makes more sense for your brand.
There are many things that might change. So, while you should have a plan and stick to it––you also have to be willing to pivot should the need arise. Be nimble and flexible. That is really the name of the game in retail these days.
This goes hand in hand with learning from others. Shift the way you think of your brand. From one with multiple demand sources that all contribute to their own P&L to one cohesive source of demand with multiple contributors. All channels need to work together to match the available inventory to demand. Ultimately, it’s a matter of doing whatever you can to get products to your customers as quickly and efficiently as possible.
You need to put a value on your store fulfillment programs. Traditionally a store is measured against sales numbers or KPIs such as conversion rate, basket size, etc. These metrics are still crucial, but so is considering the omnichannel value of your store.
What does your store’s net value look like after you include ship-from-store sales? Or how about the orders that customers pick up? Where you might have had an underperforming or flat store before, you could now have the strongest omnichannel store in your fleet. Thinking in this context will help open up the opportunity to sell all available inventory.
The truth is when you start doing store fulfillment you expose inventory problems. When you do your physical store inventory counts, you know your strengths. You know which stores struggle with data integrity or inventory ownership. What you might not know, though, is how deep those problems go. That’s where you need to look at things through a new lens.
Don’t be alarmed if this is your reality at the start of store fulfillment. You have solutions in serialized inventory and RFID technology. These inventory management tools used to be out of reach for many brands, but costs have gone down and the barrier to installation is lower.
It’s also worth asking, where does my shrink really come from? Is it a process problem in how we receive and manage inventory? Is it a data problem?
The positive is, with an omnichannel OMS, you can mitigate some of these inventory risks through routing logic, which is a dynamic action you can take when an item isn’t where you think it is. For example, you can choose to not split shipments — driving both operational and environmental efficiencies. Even more, you can change items or cancel an individual line without losing the whole order. This is key when you need to keep the cash flowing.
In short, there are many different ways you can take advantage of an OMS to reduce the pitfalls of not having solid inventory. You can also invest in inventory tech to bring visibility to your entire supply chain—bringing you one step closer to omnichannel excellence.
Store fulfillment needs to be a matter of when, not if. It drives more traffic, increases productivity, and satisfies customers. There’s no denying it’s a must.
To learn more about store fulfillment and how we enable it for brands, reach out to us today.
