September 2018 | Commentary | The Lean Supply Chain

Store Delivery Keeps Retailers in the Game

Tags: Retail, Lean, E-commerce, Last Mile Delivery, Supply Chain

Paul A. Myerson, instructor, management and decision sciences at Monmouth University and author of books on Lean and the Supply Chain for McGraw-Hill, Pearson, and Productivity Press, 732-571-7523

Multi-channel retail and fulfillment is typically based on the assumption that customers choose a main way to connect, whether physical stores or a website. Many retailers manage each channel separately with different teams, budgets, processes, tools, reporting structures, and revenue goals.

In multi-channel retail and fulfillment, stores have their own stock and sell directly to customers, while the website has its own separate stock. Customers purchasing items in stores can make returns only in store and often can't return online orders in store. Customers' online interactions with the retailer are completely separated from offline interactions.

In an omni-channel environment, however, consumers are likely to have multiple touchpoints with a retailer and expect their interactions between each channel to be seamless. Customers can order what they want, when they want, on whatever device they want, and have it delivered how they want.

A key difference between multi-channel and omni-channel is that omni-channel joins the touchpoints together so that, whatever method or combination of methods the customer chooses to make a purchase, their experience is consistent, seamless, and unified. But omni-channel fulfillment can be tricky. Some companies sell online only, while others have brick-and-mortar stores and added an online channel. Still others started off as online-only companies but are adding some form of showroom-only storefront or pop-up store.

Omni-channel customers buying online may take delivery in a variety of forms from one order to the next, in addition to traditional visits to a retail location. Furthermore, e-commerce has complicated the last mile of delivery, making it more difficult for traditional retailers.

Getting Creative

Traditional last-mile delivery involves many challenges including cost minimization, transparency, and efficiency. Those challenges, along with the growth of e-commerce, is forcing brick-and-mortar retailers to become more creative.

E-commerce businesses such as Amazon have been exploring air and land drone delivery and lockers in pre-designated locations available for customer pickup, among other innovative methods.

Some large retailers such as Walmart and Best Buy are using their stores as distribution centers where employees pick items from the shelves and backrooms to fulfill online orders. They either load the orders into FedEx or UPS trucks, or, as Walmart is testing, deliver packages themselves on their way home.

Stores can potentially cut costs substantially by having employees pick and deliver from stores, as last-mile delivery costs are a significant part of fulfillment costs. Furthermore, in the case of Walmart, two-thirds of the U.S. population live within five miles of a store.

Additional benefits of store last-mile delivery include switching online orders to locations with the most inventory of an item, reducing the need for discounts, and fulfilling orders for items that are out of stock at e-commerce fulfillment centers.

By enabling store delivery, traditional retailers may have found a better way to compete with Amazon's fulfillment network of 100+ distribution centers: using their hundreds, or thousands, of brick-and-mortar locations as DCs.






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