JDA’s annual user group conference was just two months ago, and at this event I had the opportunity to sit in on a particularly interesting breakfast meeting. The meeting touched on some “vision” topics in retailing and an industry analyst that I was sitting next to, Greg Girard from IDC, offered a statement along the lines of “retailers should try to never ship from the store.” The table fell silent and there were some quizzical looks offered, and then the conversation started up in a different direction. But his comment stuck with me, and I think that he is absolutely right. Retailers should strive to never ship from the store, rather than the current thinking that seems to embrace this mode of fulfillment as if it is best practice.
This must seem like crazy-talk in today’s buy anywhere, sell anywhere, fulfill anywhere, customer centric retailing environment. However, let’s take a moment to discuss why retailers are fulfilling from the store in the first place – it is because something has broken down in their network and the inventory is not in the right place. The right place might have been a different store where a customer was trying to buy an item. It might have been a distribution or fulfillment center where online orders are more commonly shipped from. The fact is the right place for that item at that time is NOT the store it is being shipped out of – it is far too costly to move an item all the way to a store and then ship it from that store to a consumer.
So what is a retailer to do? Judging by the interest in ship-from-store capabilities it would seem that inventory is often in the wrong place in the real world. This forces retailers to put a stake in the ground:
- Is my strategic response to this going to be invest in better planning an optimization solutions to do everything in my power to get the inventory in the right place at the right time, and to proactively drive demand for the inventory I have in the location I have it in; or
- Is my strategic approach going to be to double down on ship-from-store capabilities?
If the hype is to be believed retailers are all in on ship-from-store. I get it, no sale is a bad sale and all of that, but isn’t this the mentality that has gotten brick-and-mortar retailing into this mess to begin with? Ship-from-store adds cost and complexity, eroding margins and taking store associates out of their selling role and making them into warehouse workers. All while putting up a smoke screen over the real problem – the right product was NOT in the right place at the right time – and piling up the costs to the retailer. I’ve personally had items shipped from other stores to my home and never once have I been asked to pick up the shipping. I think that the $10 shipping cost on the $60 dollar item that I purchased may have been a bit of a margin hit for the retailer, but my daughter got the shoes she wanted so who am I to complain.
I firmly believe that if retailers do not start addressing the root cause – poor assortment planning, demand management and inventory management – they will use the shiny ball of ship-from-store to execute themselves out of business. This isn’t to say that having the capability to ship-from-store is all bad. It is a good tool to have from an exception management standpoint. Perfect plans are only perfect until you start to execute, and being able to satisfy a profitable customer by shipping them an item from another store is good business. And fulfilling that item at full price rather than marking it down in two weeks’ time is all the better. But I think that investing in systems to increase the probability that the item is in the store that the shopper has walked into in the first place is the best strategy of all.
What do you think? Are brick-and-mortar retailers chasing the shiny ball of ship-from-store or are you seeing pragmatic approaches in the market? Or am I missing an important part of the equation to justify ship-from-store?