Ship-from-store: The new wave in online retail

November 1, 2019
StoreShippers - Nienke van Meekeren
November 1, 2019
StoreShippers - Nienke van Meekeren

Ecommerce is booming worldwide. The sector continues to grow with no indication of slowing down. It is therefore not surprising that the most successful retailers today are those who are digitally active. However, this doesn’t mean that online retail doesn’t face any challenges. A major challenge lies in the fulfilment stage of ecommerce: the increasing number of online orders is becoming increasingly difficult to manage for online retailers and carriers. Brick-and-mortar stores, on the other hand, fall behind due to declining demand. To meet these challenges, it is necessary to blur the line between online and offline retail. The best way of doing this is by ship-from-store.

Let’s have a look at what ship-from-store is, how this strategy fits in today’s retail landscape and why it is seen as the new wave in online retail.

In this digital age, both physical and online presence are part of a successful retail strategy

Today’s retail landscape
The retail sector is constantly changing. Over the years we have seen a shift away from brick-and-mortar retailers to online retailers. Technological developments ensured that products around the world became increasingly accessible to consumers. Many brick-and-mortar retailers continued to conduct the same business after the advent of the internet, while online retailers continued to develop rapidly. As a result, brick-and-mortar stores were confronted with declining demand and sales, while the demand for online retail increased and online revenues continued to soar.

However, this does not alter the fact that physical stores still have an important role in today’s digital retail landscape. Although the growth for pure offline stores is a lot slower nowadays than the growth for pure online players, the turnover in physical retail is still growing. The turnover of multichannel retailers sometimes even grows faster than that of pure online players. This shows that both physical and online presence are part of a successful retail strategy in this digital age. Ship-from-store combines these forces of online and offline.

What is ship from store?
Ship-from-store is a fulfilment process where retailers use stock from their brick-and-mortar store estate to fulfil (online) orders. Instead of using centralized distribution centres, the physical store is used as a small distribution centre, to support the digital platform. Fulfilling orders this way turns the store into a virtual hub and ensures that orders are sent smoothly and quickly to the consumer.

What does this look like in practice? Customers visit the online store and place their order online. The online store gets notified that the order is placed and searches for the store closest to the consumer. The store staff then collects the correct items for the order from the store. Sometimes this is shipment by shipment, and sometimes in bulk. The store staff packs the items and prepares the order to be handed to the carrier. Finally, the carrier collects the package from the store and delivers it to the consumer.

The benefits of ship-from-store
Implementing a ship-from-store fulfilment strategy offers several benefits. Retailers who applied this strategy saw many positive results, such as higher sales, faster deliveries, optimized inventory forecasting, higher margins and lower costs2. We have listed and explained some of these benefits below.

1. Efficient use of brick-and-mortar stores
As more and more consumers order their products online, brick-and-mortar retailers are losing customers and sales are falling. At the same time are online retailers increasingly confronted with challenges in the field of fulfilment. Due to the huge number of online orders, it becomes more difficult for online retailers and carriers to manage all these orders. Implementing a ship-from-store strategy solves these problems by moving the fulfilment process to the store or by having the store serve as an addition to the larger distribution centre, which offers retailers the opportunity to use their stores efficiently and to increase sales.

2. Optimized inventory management
Ship-from-store requires better inventory management, because in-store inventory must be accurately displayed in the online store to avoid disappointed consumers afterwards. Better inventory management has the advantages that the level of service and margins are increased and the order and stock levels are lowered.

In addition, inventory is shared across all store locations and overall, this means that the retailer can carry less inventory.

3. Higher margins
If a certain product in the brick-and-mortar store is sold to a limited extent, then in many cases, without ship-from-store fulfilment strategy, it will be offered at a discounted price. With ship-from-store there is still the possibility to sell this product online at full price, or vice versa. Combining online and offline, ensures a greater exposure of products and higher margins.

4. Improved shipping costs and speed
Consumers who shop online attach value to various factors in the purchasing and delivery process. However, shipping costs and speed are often seen as the most important. Retailers who have implemented a ship-from-store fulfilment strategy have the opportunity to ship locally from a store in geographic proximity to the consumer. This ensures fast delivery and makes it possible to ship items at relatively low costs.

A successful fulfilment strategy
In 2017, one of every three brick-and-click, omnichannel had adopted a ship-from-store program. This fulfilment strategy appears to be successful for many retailers, but especially for large retailers with densely distributed stores and low-turnover inventory. These retailers have enough space in their stores for storage, and slower turnover in order to convert excess inventory to online orders. However, mid-market retailers with relatively few physical stores can also apply ship-from-store successfully. In that case the stores are used as mini distribution centres, in addition to the primary ecommerce warehouse. Together, most customers can be reached well and quickly.

Target is an example of a retailer that has successfully applied ship-from-store. The company put forward significant resources to modernize its delivery and in-store pickup operations. Ship-from-store, together with the ability for consumers to buy and order online and pick up in stores, has been a critical component of Target’s growth. It appears that ship-from-store volume doubled year over year. Moreover, Target’s same-store sales growth for November and December last year was 5.7 percent. This is a growth of 3.4 percent compared to the same period in 2017, while sales were disappointing for many other legacy retailers. Ship-from-store is seen as a big contributor to that growth.

In order to continue to compete with competitors like Target and ecommerce giants such as Amazon,  Kohl’s has equipped more of its stores with enhanced ship-from-store capabilities this year. Last year 10 stores were already equipped with these capacities. The stores are set up in such a way that they process digital orders more efficiently. The purpose of this is to improve customer experience by keeping up with digital demand and fast deliveries.

Last year, Zara also implemented ship-from-store. This Spanish apparel retailer has converted 2000 stores in 48 countries to fulfil online orders. With this strategy, Zara wants to achieve full integration between store and online stockrooms and to ensure that out of stocks on ecommerce orders are reduced, the sale of full-priced items is stimulated and the customer experience is improved through increased speed and convenience.

 


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Blog by: Nienke van Meekeren
Sources used: ProShip, Business Insider, Practical Ecommerce, Digiday, Forbes
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