This is Part 1 of the Retail TouchPoints Omnichannel Order/Pick-up/Delivery report. Part 2 will appear in the Feb. 4 newsletter.
Today’s omnichannel retailing environment requires inventory visibility that allows shoppers to order and receive from their channels of choice. This effort demands sophisticated supply chain operations that optimize product distribution from the DCs to stores and homes; stores to homes; online to stores and homes; and other combinations that uphold the omnichannel promise.
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Once again, Amazon takes a stance in omnichannel innovation: Recently the merchant announced a patent for a strategy it calls “anticipatory shipping.” Based on customer purchase history and online search behavior, Amazon will be packaging and moving unordered items to delivery hubs closest to those customers deemed most likely to order them. The approach reduces delivery times and helps Amazon compete even more aggressively across channels.
This announcement follows startling news of the Amazon drone. Now called Prime Air, the technology will deliver Amazon items in 30 minutes, according to Amazon, and may be ready “as early as sometime in 2015” ― although industry experts and consumers are skeptical about the plausibility of the drone technology.
In response to intensifying competition from Amazon and other entities, retailers “will double the rate of industry supply chain investments in 2014, as compared to 2013,” explained IDC Retail Insights analysts, in a webinar, titled: 2014 Predictions: Worldwide Retail. The IT impact includes “changes in supply chain planning, replenishment and allocation processes and algorithms to enable omnichannel fulfillment.” In response, retailers must evaluate and implement technology to meet long-term supply chain process needs, “regardless of current level of omnichannel maturity.”
Moving The Needle On Same-Day Delivery
Amazon’s activities and other industry factors are motivating retailers to consider the viability of same-day shipping and delivery. Some of the drivers moving more retailers to same-day fulfillment include: Ongoing competition from eTailers; borderless, anytime-anywhere, business; and “ubiquitous mobile and socially connected lifestyles,” according to the IDC analysts. “By 2016, 50% of national retailers will invest in distributed order management, enterprise inventory visibility, and workforce management to enable same-day fulfillment. Order process cycles can no longer be run in overnight batch processes and greater levels of inventory accuracy must be attained to protect profits.” In addition, homegrown logistics capabilities will no longer handle omnichannel complexity.
IDC suggests three priorities for retailers looking to expand their omnichannel delivery capabilities:
- Implementing distributed order orchestration that includes store and drop ship processes;
- Identifying third party fulfillment and logistics partners that can fill gaps as consumer adoption scales; and
- Executing key technologies that enable real-time order management and fulfillment and visibility to demand, supply, capacity and cost.
Google Shopping Express, Walmart To Go and eBay Now are among current same-day fulfillment services offered by leading retailers.
The recent eBay acquisition of Shutl, a UK-based delivery company, expanded eBay Now with a widespread network of local same-day carriers. “Today, approximately 75% of what people buy is local, found within 15 miles from their home,” said Devin Wenig, President of the eBay Marketplaces business unit. “Traditional retail isn’t going away. But it is transforming, and that creates enormous opportunity within the $10 trillion total commerce market.” The Shutl acquisition will extend the eBay Now delivery service to 25 markets by the end of 2014.
Home Depot Pursues Same-Day Shipping
Realizing the importance of competing in the omnichannel arena, The Home Depot is investing significantly in same-day shipping. The company is building three new U.S. direct fulfillment centers that will enable online orders to ship on the same day. The first center is slated to open February 2014. “We want to allow shoppers to place orders by 5pm and choose a one-hour delivery window,” said Mark Holifield, SVP of Supply Chain for The Home Depot. “Customers will be able to receive real-time delivery updates via their mobile phones.” The new direct fulfillment centers represent “one of the largest investments we’re making in interconnected retail.”
As The Home Depot looks to the future, “our aim is to create a flexible network of customer delivery options, leveraging all of our inventories and logistics resources. We’re also investing in new warehouse management and material handling systems to enable faster response order picking and shipping in our DCs.” The Home Depot also is working to enhance vendor-direct fulfillment.
“This integration of our view of orders, inventory and transportation resources,” said Holifield, “will enable more flexible customer delivery options, improved inventory productivity and a more efficient transportation process.”
Retailers Embrace Ship-From-Store Capabilities
The Home Depot also is investing in systems and processes that “further enable stores as effective origins for delivery,” Holifield stated. This includes “taking orders online for delivery from the store.”
Today, 83% of U.S. retailers have rolled out, or plan to roll out in the next 24 months, a ship-from-store program, according to a study from Forrester and OrderDynamics, titled: The Retail Order Management Imperative. Furthermore, 54% of these same retailers have rolled out — or plan to roll out — store fulfillment capabilities to more than half of their stores. “With store fulfillment now a reality,” the report indicated, “these retailers are already fulfilling — or expecting to fulfill — an average of 35% of their online orders from stores.”
Though retailers appear to be making a lot of progress fast in enabling ship-from-store, RSR offered a “ship-from-store reality check.” In a recent survey report, titled: Supply Chain Execution 2014: Making Omni-Channel Profitable, RSR stated that “only 37% of retail respondents said they have or are in the process of getting online visibility to in-store inventory. How can retailers confidently promise in-store inventory to customers if they can’t confirm that it’s really there?”
Meanwhile, Best Buy, Gap and Walmart are among the many retailers committed to ship-from-store initiatives. Specifically, these three retail giants are shipping orders to stores closest to customers then having the items picked, packed and delivered to those nearby locations. In fact, according to an article in USA Today, Best Buy could generate an extra $5.8 billion in sales and $168 million in profit during 2014 by shipping online orders from Best Buy stores.
In mid-January 2014, eBay Enterprise announced the availability of a Ship-from-Store SaaS solution, allowing retailers to turn their physical retail locations into these “virtual distribution centers.” The company stated that Ship-from-Store benefits for both retailers and consumers include:
- Decreased delivery costs and times for customers by routing shipments from the nearest possible physical location;
- Optimized order fulfillment through physical storefront inventory, expediting the ability for retailers to debut new products; and
- Profit margin protection via moving store inventory online, as opposed to marking it down in-store.
Other retailers pursuing ship-from-store include:
- Lilly Pulitzer, a multichannel retailer of women’s fashions, relies on order management solutions from Manhattan Associates to allow ship-from-stores, online-to-homes, and DCs-to-stores, “to solidify our omnichannel operations,” said Keary McNew, CIO at Lilly Pulitzer, in an interview with Retail TouchPoints. The systems “afford us the ability to expand our market reach, merge our online traffic with our stores, and create a seamless experience for our customers.”
- Eclipse is a Canadian women’s apparel retailer with 68 brick-and-mortar stores. Recently the company expanded into omnichannel retailing with an e-Commerce site powered by OrderDynamics technology. The launch includes enterprise-wide inventory visibility allowing several critical omnichannel features, which include shipping from local stores.
- Modell’s Sporting Goods, which operates an e-Commerce site and 154 brick-and-mortar stores, uses order management technology from Shopatron to merge online and offline inventory insight. The advanced capabilities allow the sporting goods retailer to provide ship-from-store, in-store pick-up and other omnichannel order/delivery capabilities.
The ship-from-store program, launched in 2013, has resulted in a 277% increase in year-over-year sales for Q2/Q3 2013. Modell’s will expand ship-from-store to additional locations throughout 2014.
Part 2 of the Retail TouchPoints Omnichannel Order/Pick-up/Delivery report will appear in the Feb. 4 newsletter.
