Today's traditional brick and mortar retailers are faced with the reality that modern internet retailers (e-tailers) have permanently changed the order fulfillment game. According to the U.S. Chamber of Commerce, the percent of e-commerce retail has grown from 3 percent to 9 percent in the last decade. Among the Millennial and Generation X demographics, this trend is rapidly increasing. As a result, e-tailers have changed their business model and built distribution networks to provide the seamless execution needed to deliver on increasingly high consumer expectations. Two-day delivery or less is the new norm. With price and speed becoming the lowest common denominator, the customer experience has been redefined and brand loyalty is taking a back seat.
The question for traditional retailers - whose business model is based on the premise that customers prefer to purchase items in stores - is this: How can we effectively utilize our store network to exploit these new opportunities? In Intelligrated's most recent On The Move webinar, James Hendrickson, senior product manager, retail solutions from Honeywell, and I explained how retailers can level the playing field by embracing their stores as distribution centers and realizing that their physical storefronts are a huge advantage.
To begin making this transition, it's important for traditional retailers to remember that their customers still have a need for instant gratification. There is no substitute for going to a local store to evaluate and purchase items - customers still want the product knowledge and expertise from sales associates. The ability to return items easily and to avoid shipping charges is also driving customers back to the store.
Today's consumer also still wants to shop online from any of their connected devices. For traditional retailers to stay relevant and offer the best of both retail worlds, they need to support this e-commerce preference and offer new shopping methods, like buy online pick up in store (BOPIS). Covering both of these bases is absolutely necessary to taking back market share.
Improving store efficiencies - while excelling at BOPIS and other complex tasks - requires embracing the role of the store as a mini-DC and deploying the behaviors that drive DC execution. It starts by understanding the similarities of order fulfillment processes used in both DCs and stores, such as receiving, staging, put-away, picking, packing and shipping. It also means employing the same laser focus on processes execution to ensure inventory and order accuracies, capture transactional data and direct work along every step of the fulfillment process.
In our webinar, we recommended starting this transition by focusing on the processes that cause the most pain for traditional retailers. Typically, this is the fulfillment of e-commerce orders, whether that's BOPIS, or buying online and shipping from the store. This can be accomplished by focusing on three order fulfillment building blocks:
- Systemically direct all work to optimize order release and task execution. If retailers don't direct the work, they will not hit their goals.
- Build a foundation of transactional data around each process by tracking, scanning or speaking every activity. Not only can this be done without slowing the process down, it will also build a "chain of custody" of inventory in the stores that results in true inventory accuracy.
- Set labor standards for all work and track against these standards. This drives predictability in task duration and performance, such as knowing exactly how long it should take to do basic tasks like picking an online order or unloading a truck.
By employing these principles, retailers can become unpredictable in the fulfillment of e-commerce orders and achieve the execution efficiencies to compete on a level with the e-tailer giants. To learn how to turn your stores into DCs, please visit our On The Move webinar archives and view the session in its entirety.
To learn more about Intelligrated Store Solutions, visit booth #2434 at NRF's Big Show on January 15-17 in New York City. Demo the Voice solution to be entered in a drawing to win an Apple MacBook Pro.