Today’s savvy retailers go the extra mile to achieve and maintain the sharp competitive edge that’s necessary to boost profits and remain in business. Some now utilize a “ship from store” strategy, fulfilling online orders from stores near customers’ homes rather than from a warehouse. The end-result is a host of benefits that have a positive impact on retail competitiveness, including:
1. The ability to ship faster, at a lower cost.
The closer the contents of an order to its destination, the less time it will take for that order to reach the customer. According to a report by consulting firm Kurt Salmon, Toys R Us has largely reduced order cycle times to two days by fulfilling orders from stores. In many instances, a ship from store model also lets you take advantage of carriers’ single-zone ground delivery option, reducing your transportation costs.
2. Improved margins and product turns, with reduced markdowns.
Your margins will be fatter and your product turns, faster when you offer slow-moving inventory online and at full price instead of marking it down. This is especially true of seasonal items like apparel, as some styles sell well in certain areas year-round while others are in demand only briefly.
Using stores as distribution centers also makes revenue grow by providing a “platform” for selling items that were ordered online and returned to a store. These items can be resold online — at full price instead of at a discount as in the past — then dispatched from the store in question.
Consider again statistics from Kurt Salmon’s report. With ship from store, it indicated that retail margins have risen by one percent to two percent overall with up to 30 percent on items nearing markdown.
3. Revenue growth.
Filling online orders for merchandise that is out of stock at distribution centers boosts revenue by saving the sale. How? It increases the volume of inventory you have available for sale and lets you satisfy demand for out of stock items. Rather than sacrificing an online sale because the distribution center is out of stock on a particular item, you can use another store as an alternative distribution center and ship it from there.
Or, if it’s a store that’s out of stock, you can ship requested items from another of your locations. Either way, there are big rewards. In the Kurt Salmon report, Men’s Wearhouse said it saves more than 1,000 orders per day using ship from store — adding $18 million of top-line revenue annually. The report also cited retail revenue increases of 10 to 20 percent when merchandise that’s out of stock in distribution centers is sent to customers from stores.
4. Improved service levels.
Offering next-day shipping isn’t an imperative for every retailer. However, service enhancements like shorter time and shipping costs are great competitive differentiators. Using stores as fulfillment locations, as explained in #1 above, means shorter shipping times. This leads to better service. Additionally, it gives you the flexibility to offer free shipping because the shipping expenditure you’ll incur is minimal.
While it may require a bit of work, adopting a ship from store model will put you on a firm playing field with other retailers. It will also yield payback that you’ll see in your store’s operations and bottom line. For these reasons alone, it’s a path worth pursuing.
