A New Argument for Pool Distribution as More Specialty E-Retailers Set Up Shop

Tags: Distribution, E-commerce, Retail Logistics

As consumer demand intensifies and changing shopping behaviors put pressure on the industry to adapt, retailers have continued to redesign their networks to keep up. When distributing high-volume retail goods, determining the right model is key. So what’s the quickest and most cost-effective way to keep fast-turning retail products moving from DC to store shelf? Although there are several strategies to consider, modern pool distribution is one of the most tried and true.

In the years to come, store-level competition will grow, challenging specialty retailers to enhance the customer shopping experience—and the logistics processes that help keep store shelves stocked and replenished, as well as those that ensure merchandise arrives on-time, particularly during peak shopping seasons.

For this reason, pool distribution is one strategy that’s getting a second wind in the face of intensifying e-commerce pressure and the changing face of America’s malls. For years, many specialty retailers have relied on pool distribution—the unique concept of sharing a common network of logistics services providers to manage the flow of goods from DCs/suppliers to the backrooms of numerous geographically dispersed stores—to substantially lower costs and increase delivery frequency.

However, as consumer expectations have evolved—in terms of in-stock inventory (in-store and online), precise fulfillment times, more frequent returns and flexible delivery options—the benefits of pool distribution extend well beyond delivery speed and cost-savings. In addition to the transportation and distribution cost-savings, the pool distribution model greatly reduces transit time and streamlines delivery to the store. The ultimate goal for the retailer is not to have inventory in its distribution center, but to get it on the shelf.

For example, instead of five retailers having five separate less than truckload (LTL) deliveries to a mall in one day, those retailers share a single delivery where each store gets serviced as one stop. Stores can be replenished more often because the volume of goods moving through a dedicated transportation network is higher in that lane. In essence, pool delivers the higher speed of parcel with the lower cost of LTL.

Today, retailers are using pool distribution in a variety of innovative ways to compete with ecommerce-first retailers who, by design, are able to be more responsive to shopper’s needs. For example, with pool distribution, retailers have complete visibility into where merchandise is at a moment’s notice and greater insight into replenishment lead times—helping them to optimize in-store inventory management and replenishment programs. At last year's Descartes Evolution, retailers such as Five Below discussed its use of pool distribution in high-volume markets to achieve greater transparency and flexibility in managing inventory coming into its stores, and helping the company make better use of backrooms.

Further, some retailers, such as Caleres Inc., parent company to Famous Footwear, Naturalizer and Sam Edelman brands, are strategically using pool points themselves as inventory storage locations for fast-moving, peak season and/or promotional inventory. Having merchandise at-the-ready ensures more timely replenishment when stores need it, and helps minimize the likelihood of out-of-stocks—something that can quickly erode customer loyalty or, worse, drive your customers to competitors.

In a time when malls are becoming more of an experience, and exciting e-commerce companies are opening their first stores, specialty retailers need to ensure they too are transforming to meet the demands of modern day consumers. Logistics is no longer a backroom function—it’s front and center as part of the brand experience. From the clothing on the shelves to the shipments consumers get in stores, at work or at home, everything is touched by logistics. Pool distribution is just one strategy retailers can use to optimize how, when and where inventory is received, freeing up employees to interact with consumers and close sales—no matter who sets up shop next door.






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