IN THE FRICTION-FREE WORLD of online retailing, getting the order is easy. Delivering on the promise is hard.
At the Las Vegas Shoptalk conference last week retail thought-leaders shared insights about the fulfillment challenge. Their consensus: it’s not going to get any easier.
“My bet on shipping is faster and freer,” said Jason Goldberger, president, Target.com and Mobile Target, in a panel on The Changing Role of Stores in Ecommerce Fulfillment.
“It used to be that our guests just wanted free shipping,” he added. Now they demand overnight delivery and same-day store pickup.
Michael Tobin, SVP Strategy & Innovation at Macy’s, explained that successful and cost-effective fulfillment now requires a sophisticated algorithm that considers multiple factors, including the ship-to address, units on hand, units to ship, location capacity, combinability of items in an order, and more. “We’re on the 3rd or fourth version of that algorithm,” he said.
“A couple of years ago it might have been driven by a business rule. Now it’s multi-factor, with settings that can be tweaked as needed.” A key objective is, “How do we unlock the value of store inventory?”
Target lagged behind some other retailers in ship-from-store, said Goldberger, but it responded as it saw the industry becoming “more about agility than about scalability.”
It currently ships orders from almost 500 of its 1,300 store locations. Steps are taken to ensure that those stores have “better in-stock position.” His company too has made a transition from business rules to an optimization process, he said.
Its buy-online-pickup-in-store is growing at about 60% year-over-year, Goldberger said. But just over half of total Target.com sales are items not found in stores, “So we also need more fulfillment center space.”
Online increasingly includes a store or curbside pickup option. In this realm, being big is not always the key to price competitiveness, said Helen Vaid, VP digital store operations & experience for Walmart Global eEommerce, “Some costs go down as you scale; others go up.”
One of the lessons from Walmart’s recent experiments with click-and-collect at its stores is that staffing costs increase, for example. The added investment may prove to be well-justified, however.
“Customers don’t like waiting,” said Vaid. “Anything that helps improve that is worth considering.”
A pure online retailer, Jet.com keeps costs in line by persuading shoppers to build larger orders that can be delivered in a single shipment, said founder and CEO Mark Lore. The highly-advertised startup builds excitement into the online experience in real time with “Smart Cart Savings” that accrue each time an item is added to the virtual basket.
“We currently average about six units per order,” Lore said. Jet.com has a free shipping and returns policy, and a two-day delivery promise on most consumables, so highly efficient fulfillment is essential to its bottom line.
That intention is now about to be tested harder, as Jet.com launches a fresh products delivery business, beginning in the New York metro and soon to cover the eastern seaboard from Boston to D.C., Lore said. “We’ve been testing for months – experimenting with refrigerated coolers and boxes.”
© Copyright 2016 James Tenser