How Retailers Can Benefit From Turning Stores into eCommerce Fulfillment Centers
While store fulfillment has been around for years, the pandemic made it status quo for many retailers as they implemented buy online, pickup curbside (BOPAC) and buy online, pickup in-store (BOPIS). Shoppers were offered multiple eCommerce fulfillment options and became accustomed to having them. Now, as retailers grapple with high inflation, rising costs, and lower margins, consumers continue to expect fast and convenient order fulfillment.
To meet customer expectations, retailers are assessing ways to keep inventory closer to customers, reduce transportation and shipping costs, and be able to get merchandise into customers’ hands within the expected two-day or even same-day delivery time. Turning stores into eCommerce fulfillment centers can help achieve these goals while offering numerous benefits—but it also requires an adjustment to logistics and a new paradigm for how stores operate.
Using Stores for eCommerce Fulfillment
Retailers with brick-and-mortar stores already have product close to their customers. With some adjustment to backend operations, these stores can stock additional inventory for online order fulfillment. BOPAC orders already have their own unique space in stores with employees dedicated to fulfilling these orders. While the concept of using a store to fulfill orders is already fairly mainstream, expanding it to support eCommerce order fulfillment requires additional operations, training, space, and employees.
Ecommerce fulfillment at a store is similar to traditional fulfillment, except for the difference in where the inventory is sourced. In this process:
- Customer places an online order that is entered into the order management system (OMS).
- The order is received by the nearest retail location with in-stock inventory.
- The store’s dedicated online order fulfillment team picks, packs, and ships/prepares the order.
- The customer is notified of shipping and/or pickup availability.
- The carrier delivers the package to the customer or the customer picks it up in-store.
In this process, inventory can be managed at a more micro-level and shared across local stores. This reduces the need to have larger volumes of inventory stored in centralized warehouses. Keeping inventory as close to the customer as possible ensures a faster delivery/pickup time, and it also reduces supply chain and last mile delivery costs.
Challenges of eCommerce Fulfillment in Stores
Turning stores into fulfillment centers requires a detailed strategy and careful planning. While many retail locations quickly built-out curbside delivery services to service customers during the pandemic, they soon discovered that there are some challenges that need to be addressed if they want to sustain this long-term:
- Employees need to be reskilled. Many store associates were simply told to start picking, packing, kitting, and delivering orders curbside with little training. These new duties often came in addition to their regular work. Order fulfillment in stores requires training associates on best practices, efficiency, safety, and customer service.
- Employees compete with in-store customers. Stores that take product off the shelf for online order fulfillment have found that, at times, their employees compete with in-store customers for products. This leads to a negative customer experience for in-store customers and is frustrating for employees as well. Stores need a dedicated inventory space for online orders.
- Congestion in crowded stores. Stores were not built to be eCommerce fulfillment centers and, without adding on or remodeling, many have little room for the additional inventory needed. Retailers can rent or use vacant retail space as micro-fulfillment centers adjacent to or near their store locations.
- Lack of a modern OMS. Managing fulfillment services in stores requires intricate coordination and connected systems. Retailers that do not have sufficient or integrated technology will likely find that store fulfillment creates chaos and, ultimately, could have a negative impact on the customer experience.
To implement a store fulfillment strategy that handles online orders, retailers need to recognize that this model requires strategic planning, tech investment, retraining or hiring for order fulfillment skillsets, dedicated real estate space in stores, the ability to handle returns, and an awareness of how store fulfillment operations can and will impact the customer experience.
That said, there are numerous benefits to this model.
5 Benefits of Turning Stores into eCommerce Fulfillment Centers
When done well, the biggest benefit of store fulfillment is an improved and more convenient customer experience. Other benefits include:
- Lower order fulfillment costs. Store fulfillment requires that inventory for the store and online shopping be transported to the same place. Storing inventory in stores reduces or eliminates the need for additional storage space and warehouse management. Product that is closer to the customer lowers the last mile delivery costs as well.
- Better inventory management. With a modern OMS that unifies all inventory and provides real-time visibility of SKUs and inventory status across the enterprise, store fulfillment makes it easier to forecast inventory demands and customize inventory to local needs. This reduces overstock and forecasting errors.
- Faster order and delivery processing. Speed matters to customers and store fulfillment cuts down on transportation time during the eCommerce fulfillment and delivery process. Additionally, it gives customers the opportunity to pick up their order in-store, same day, eliminating shipping altogether.
- More personalized service. Just as customers are able to interact with associates in the store, keeping order fulfillment local lends a more personal touch as employees know the places they live and may even get to know customers who visit the store or engage with them regarding their orders. This can lead to upsell opportunities.
- More local jobs. By shifting order fulfillment to local stores, retailers create more jobs in the community and keep revenue flowing in the local economy. This can improve brand loyalty.
Best Practices to Begin Store Fulfillment Operations
As noted, turning stores into micro-fulfillment centers requires strategic planning and resources. Here are best practices that support a successful store fulfillment operation:
- Evaluate the costs between store fulfillment and third-party fulfillment providers. A fulfillment partner may be able to achieve the same results at lower costs and without disrupting current operations. Outsourcing eCommerce fulfillment ensures retailers get an expert in comprehensive fulfillment services and transportation management, and most also negotiate better rates and services with carriers. Compare whether it makes sense to shift to store fulfillment or partner with a third-party fulfillment expert that might be able to provide the same outcomes. Additionally, many eCommerce fulfillment partners support store fulfillment with automation technology as part of their solutions.
- Assess the current tech stack. Retailers need a modern, cloud-based OMS that provides real-time visibility into inventory, the supply chain, logistics, shipping, and reverse logistics. It needs to be able to integrate with existing backend and customer-facing eCommerce platforms to keep everyone on the same page.
- Evaluate the practical aspects of store fulfillment. How much space in the store is available? What needs to change to make space? Are there employees available to reskill? How many new hires will be needed? What will the operation look like within the store? What will the impact be on other employee workflows and in-store customers?
- Talk to shipping carriers. What are their needs to make the operation successful? What costs and shipping rates will be involved? What shipping options and availability do they have to provide same-day or two-day service in the local geographical area?
- Ask customers. While it may be popular to implement store fulfillment, it is a major change in a retailer’s business model. Rather than assume customers prefer it, ask for their input. Customer satisfaction typically centers around convenience, speed, and whether they received the right order on time. They may not care how a retailer achieves this.
Overall, store fulfillment is an eCommerce fulfillment strategy that is changing the landscape of the industry. Shifting order processing back to local stores can be a cost-effective way to continue to meet customer expectations for availability, convenience, and speed. To succeed, retailers need to ensure it makes business sense to repurpose stores as fulfillment centers, and that they have the necessary technology and infrastructure in place.
Third-party logistics and fulfillment providers can help support store fulfillment or augment the eCommerce fulfillment process in hybrid models. They can provide warehouse space and inventory storage, handle international shipping, provide customer care services, negotiate better shipping times, manage high volumes during peak seasons, offer complete reverse logistics services, facilitate dropshipping, and leverage automation (such as robotics) to help achieve efficiency and drive down costs.
Learn more about how Radial supports store fulfillment.
