Beware the Ship-From-Store Spin Cycle

Seems like every so often there’s a new trend that takes the retail and e-commerce world by storm and the latest of these seems to be Ship-From -Store.

An omni-channel nirvana being pumped by systems companies, and falsely supported by ill conceived surveys of analysts alike, the best thing since sliced bread this year is apparently Ship-From-Store.

On the surface Ship-From-Store sounds like a great idea. Buy some really expensive new systems and voila every one of your hundreds or thousands of stores is suddenly a fully functional fulfillment center.

If only reality was so easy! Those who have tried or will soon try Ship-From-Store very rapidly realize the complexities involved including distracting sales staff, stocking packing materials, exacerbating store level out of stocks, further complicating logistics & SCM and allocating expensive retail space to name only a few.

Benefits of course abound, rapid delivery of bountiful stock to satisfy all of your online consumers from their nearest store until the reality sets in. Years of cost cutting in retail have led to staffing already at precipitously low levels so this new distraction of Ship-From-Store only means one more reason staff are in the backroom while customers search for help or just the guilty pleasure of paying for their selected products.

Still think Ship-From-Store is a good idea? OK, let’s get into some logistical discussion of the practice.

First off, understand that there is a cost to get the product to a store before being in a position to Ship-From-Store. And once you deplete that item at the store by shipping it out to a consumer there’s another cost and time delay to replenish the item so there’s a product on the shelf for the next consumer who walks into the store.

Let’s compare to the fulfillment center option where space, labor, productivity and sometimes even automation are focused and optimally trained to support the B2C consumer delivery with the highest possible productivity at the lowest cost. Some may reply by saying that retail store clerk wages are lower, but any difference of a dollar or two in wage rate is easily offset by the above mentioned issues and productivity deficit, even before applying automation or access/egress issues to the equation.

Add to the above the simple fact that retail space allocated to Ship-From-Store costs 5 to 10 times as much ($50 to $100) as the $10 a square foot or less for fulfillment center space in non- prime locations should even give the most avid proponents of Ship-From-Store pause for thought.

Some have admirably tried to mitigate the negative impacts of the Ship-From-Store model by shifting to a Hub-Store model where only one or two locations in every region are outfitted to support Ship-From-Store requirements for all stores in their area. Although this does reduce the impact by addressing some of the negatives outlined above, all I can suggest is that if a retail chain wants to introduce regional hub stores masquerading as fulfillment centers, why not just call a spade a spade and set up the fulfillment center in space costing 5 to 10 times less, that also happens to have much better access and egress for bringing in stock and shipping it out for consumer delivery?

Like any method or concept there are of course some for whom a Ship-From-Store model is working well based on value of product, store/chain size and distant location of stores. The interesting fact is that even some of these Ship-From-Store leaders are only shipping 50 to 70% of product from their stores with the other 30 to 50% coming from their fulfillment centers.

As you may have already guessed this is an opinion piece with my ultimate goal being only to suggest that before making the move to Ship-From-Store, you have an accurate logistical, inventory and cost model created comparing the various options before turning your retail and e-commerce business on its’ head.

Some may say that by eliminating fulfillment centers and moving to a Ship-From-Store model the often difficult duality of keeping separate inventories for distribution to stores versus e-commerce fulfillment direct to consumers will no longer be required.

This is indeed true and something I wholeheartedly support, but not in a Ship-From-Store model, instead the more logical movement is to a regional fulfillment center model where the same operation that rapidly fulfills online consumer orders also rapidly fulfills in-store inventories reducing if not entirely eliminating store level out-of-stocks likely representing a more viable solution.

Also, for those like me supportive of more sustainable business practices, regional logistics models also happen to have much lower carbon footprints than national logistics networks. Not to mention the benefit retailers will gain of rapid service either next day or even same day delivery to consumers or stores as required.

And although my general view is that Ship-From-Store is truly a flawed solution to the omni-commerce puzzle, a key piece now emerging is Reserve-In-Store. Reserve-In-Store is a brilliant way to bridge the gap between the online and bricks & mortar retail worlds as demonstrated by the wildly successful introduction of the program at The GAP last Fall. Look out for my upcoming blogpost on Reserve-In-Store as it makes ultimate sense to ship product to a store if a customer is going to pick it up there.

However in the case of Ship-From-Store I simply ask why would any retailer in their right mind pay the extra cost to ship a product to a store that’s just going to be shipped directly to a consumer’s home anyways?

Cheers

Jeff Ashcroft

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