As retailers continue to expand their omnichannel service offerings, they're increasingly turning to a traditionally underused resource: the brick-and-mortar store.
Talk to enough retailers, wholesalers, and manufacturers, and they'll tell you that building up their omnichannel fulfillment networks is imperative for maintaining market share. But dig a little deeper, and you'll soon realize that omnichannel retailing is not a single bullseye target, but rather a diverse mosaic of operations that can include everything from shuttling inventory between brick-and-mortar storefronts to offering BOPIS, or "buy online, pick up in store," services.
Many practitioners have traditionally defined "omnichannel" as "distribution from anywhere," including the distributor's distribution center (DC), direct from the supplier, or shipped from a store or third-party logistics partner (3PL). But today, the term "omnichannel" seems to have almost as many definitions as the number of players in the marketplace.
Article Figures
Which omnichannel capabilities do you currently enable?Enlarge this image
Which of the following technologies do you currently use as part of your omnichannel initiative?Enlarge this image
What percentage of your direct retail revenue comes from each channel?Enlarge this image
To learn more about the current state of omnichannel fulfillment practices, Supply Chain Quarterly's sister publication DC Velocity teamed up with ARC Advisory Group, a Dedham, Massachusetts-based management consulting firm, to conduct an industry survey. Respondents answered 32 questions about their approach to meeting current challenges in omnichannel commerce, with a focus on order fulfillment and, especially, the changing role of the retail store in helping companies deal with a surging tide of online orders. (For more information on the study, see the sidebar.)
ABOUT THE STUDY
This year's omnichannel study was conducted by ARC Advisory Group in conjunction with Supply Chain Quarterly's sister publication DC Velocity. ARC analyst Chris Cunnane oversaw the research and compiled the results.
The study explored current challenges in omnichannel commerce,with a focus on order fulfillment and, especially, the changing role of the retail store. Respondents included logistics professionals from a variety of industry verticals, who submitted answers during July and August 2018.
As for the demographic breakdown, the majority (60 percent) of respondents sold goods through a combination of direct and indirect sales channels. Another 30 percent sold merchandise through direct retail only, and the remaining 10 percent through indirect sales channels only.
A report containing a more detailed examination of the omnichannel survey results is available from ARC. For order information, visit https://www.arcweb.com.
Many different shades
The survey revealed that retailers deploy a broad spectrum of cross-channel tactics to support sales in today's challenging omnichannel environment from "order at store, fulfill from a warehouse (or another store)" to "return to store, even when goods are ordered online." (See Figure 1 for the full rundown.) The survey also looked at what particular tools respondents rely on to get those jobs done. The data showed that the most common technologies or applications currently used by respondents as part of their omnichannel initiatives are warehouse management systems (80 percent), transportation management systems (76 percent), and total-landed-cost analytics (61 percent). (See Figure 2 for the complete list.)
The respondents are also taking a variety of actions to recover the supply chain costs associated with fulfilling omnichannel orders. The numbers show that the most common approach is to collect fees for expedited delivery, cited by 51 percent of survey-takers. Next on the list was charging delivery fees for all orders (40 percent), followed by collecting fees for returns shipments (28 percent). (See Figure 3.)
Even with these efforts to recover costs, retailers' investments in their omnichannel capabilities (which include software, hardware, training, and shipping, among others) add up to serious money. So, what's motivating companies to continue adding tiles to the omnichannel mosaic? Respondents said the top four reasons they were participating in omnichannel commerce or intending to do so were: to increase sales (51 percent), to increase market share (50 percent), to improve customer loyalty (45 percent), and to increase margins (21 percent).
A growing role for stores
Over the past few years, there has been increasing attention paid to the practice of using store inventory to fulfill e-commerce orders. In response to this growing trend, this year's survey took a particularly close look at the role of the store in omnichannel fulfillment. While some major retailers, such as Walmart and Best Buy, are certainly using stores in this capacity, the survey found that the majority of e-commerce orders are still being filled from distribution centers. Sixty-eight percent of respondents said they were fulfilling at least some of their orders through a traditional DC that also handles e-commerce. Thirty-nine percent said items were shipped directly from the manufacturer or supplier, and 32 percent said they filled orders through a web-only DC. Only 26 percent of respondents said they were filling e-commerce from the store.
When were retailers choosing to use stores to fulfill e-commerce orders? The primary reason cited was inventory constraints or stockouts at the local DC (63 percent). That was followed by distance to the customer delivery location (53 percent) and resource constraints at the DC (13 percent).
"Survey respondents indicated that they frequently use stores for e-commerce picking, packing, and shipping when DCs are unable to meet overall order volumes," said ARC Senior Research Analyst Chris Cunnane, who oversaw the research and compiled the results. "In this case, when the DC is flooded with orders and will not be able to meet delivery timeframes, it will [hand off] the order to a local store to make sure the customer gets the order when they expect it."
To get a better sense of store-based fulfillment practices, the survey also asked respondents how they handled e-commerce orders filled through a store. The overwhelming majority (94 percent) said the stores both picked orders and shipped them to customers. Another 59 percent said their stores picked orders and held them for customer pickup, while 47 percent said orders were shipped from the DC to the store for customer pickup. (Survey-takers were allowed to select multiple responses to this question.)
"The most popular method for store fulfillment, as selected by 94 percent of respondents, is to pick orders in the store and ship them to the customer," Cunnane said. "Compared to last year's survey, when fewer than 70 percent of respondents identified pick and ship from the store, this is becoming a bigger part of store operations."
Turning retail stores into fulfillment operations will not be easy, however. Survey respondents identified three main capabilities that were crucial to a successful in-store fulfillment program. More than half (58 percent) of respondents said that they needed to  have visibility of inventory across all locations (58 percent), while 53 percent said the fulfillment process had to be easy for store staff to implement. Finally, 42 percent acknowledged that store associates would have to be trained in how to properly pick, pack, and ship orders.
"Training is a big part of ship-from-store, as the skills required for floor staff and warehouse staff are significantly different," Cunnane said. "Training store associates on how to properly pick, pack, and ship speeds up the process while helping to eliminate errors or damaged merchandise."
Given the need for additional investment in time and training, retailers appear to be somewhat selective about the stores they use for e-commerce fulfillment. Only 40 percent of respondents said they had enlisted all or almost all of their stores in the effort. From there, the numbers dropped off quickly. Twenty-seven percent indicated they handled e-commerce fulfillment at "a widespread selection" of stores, and another 27 percent at "a select subset" of stores. Thirteen percent said they used stores on a limited pilot basis, and 7 percent indicated that they didn't use stores for e-commerce fulfillment at all.
Brick and mortar is still king
The e-commerce revolution is happening fast, and our survey showed that most retailers are investing large amounts of time, labor, and money to keep up. But every gold rush needs a reality check, so it's worth remembering that brick and mortar is still king. Asked what percentage of their direct retail revenue currently comes from each channel, respondents said 57 percent came from brick-and-mortar outlets, 33 percent from online (including mobile) sales, and 14 percent from call center/catalog sales.
Still, it's clear where the trend line is going. Just five years ago, brick and mortar generated a full 64 percent of sales, according to the survey respondents. Brick and mortar's share has slipped to 57 percent today, and respondents expect it to slide further—to 50 percent—in five years' time. By contrast, survey-takers see online's share, which stood at just 22 percent five years ago, rising to 39 percent by 2023. (See Figure 4.)
Work in progress
Taken together, the survey results indicate that omnichannel fulfillment is still in a state of flux. As retailers scramble to adjust to a shifting marketplace, they continue to fine-tune their networks, processes, and technologies. At the same time, they're adding tiles to the complex omnichannel fulfillment mosaic. To make it all work, they're relying more and more on a resource that was once just a bit player in the omnichannel game: the retail store.
Editor's note:Â A similar version of this article originally appeared in the November 2018 issue of DC Velocity magazine.
Organizations are working to make their supply chains more resilient to disruptions and responsive to abrupt market changes, the firm said in its “2024 ISG Provider Lens Supply Chain Services” report for the U.S. In the wake of major geopolitical events that have affected supply chains, including international conflicts and the COVID-19 pandemic, companies are seeking to prevent or quickly bounce back from supply or demand shocks.
U.S. companies in particular have been especially fast to adopt digital supply chains, due to lighter regulation in the country and a higher willingness to take technology risks, ISG says. Many U.S. firms are also undertaking digital transformation as they shift from global to regional or local supply chains to reduce the risk of future disruptions.
A top goal for U.S. enterprises is aiming for more real-time insights and data-driven decision-making, prompting them to clean up and integrate data from throughout their supply chains, including from both internal systems and external suppliers, ISG says. End-to-end visibility and process orchestration could improve supply and demand forecasts, order fulfilment and profitability. Providers are helping clients carry out this major transition, usually in one part of the supply chain at a time.
“Cost is still a concern for supply chains, but capability is gaining importance,” Bob Krohn, partner, manufacturing, for ISG, said in a release. “Service providers are stepping up to help enterprises implement systems that meet their unique requirements.”
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Gulf Coast businesses in Louisiana and Texas are keeping a watchful eye on the latest storm to emerge from the Gulf Of Mexico this week, as Hurricane Rafael nears Cuba.
The category 2 storm’s edges could also brush Florida as it heads northwest, causing tropical storm force winds in the lower and middle Florida keys. However, the weather agency said it is too soon to forecast Rafael’s impact on the U.S. western Gulf Coast.
In the face of campaign pledges by Donald Trump to boost tariffs on imports, many U.S. business interests are pushing back on that policy plan following Trump’s election yesterday as president-elect.
U.S. firms are already rushing to import goods before the promised tariff increases take effect, to avoid potential cost increases. That’s because tariffs are paid by the domestic companies that order the goods, not by the foreign nation that makes them.
That dynamic would likely increase prices for U.S. consumers as importers pass along the extra cost in the form of price hikes, according to an analysis by the National Retail Federation (NRF). Specifically, Trump’s tariff plan would boost prices in six consumer product categories: apparel, toys, furniture, household appliances, footwear, and travel goods. “Retailers rely heavily on imported products and manufacturing components so that they can offer their customers a variety of products at affordable prices,” NRF Vice President of Supply Chain and Customs Policy Jonathan Gold said in a release. “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices.”
The rush to avoid those swollen costs can already be measured in the form of rising rates for transporting ocean freight, as companies start buffering their inventories before the new administration officially announces tariff hikes. Transpacific rates are still $1,000/FEU or more above their April lows, showing increased ocean volumes and climbing rates generated by shippers’ concerns about supply chain disruptions including port strikes and the Trump tariff increases, supply chain visibility provider Freightos said in an analysis. "The Trump win may start shaking up supply chains even before he takes office. Just the anticipation of higher tariffs may lead importers to pull forward shipments, creating a preemptive freight frenzy," Judah Levine, Head of Research at Freightos, said in a release. “Frontloading will cause freight rates to feel the heat as importers race to dodge the extra costs, similar to what took place with Trump’s tariffs on Chinese goods in 2018 and 2019."
Another group sounding a note of caution about international trade developments was the Global Cold Chain Alliance (GCCA), a trade group which represents some 1,500 member companies in more than 90 countries that provide temperature-controlled warehousing, logistics, and transportation. “We congratulate President Trump on his election. We also congratulate all those who have been elected to the U.S. Senate and House of Representatives,” GCCA President and CEO Sara Stickler said in a statement. “We are also committed to promoting the growth of exports from U.S.-based food production and broader manufacturing sectors. We will engage constructively in the policy discussion about future trade policy and continue to make the case for the importance of maintaining balanced and resilient trade routes for food and other temperature-controlled products across the world.”
Businesses in the European Union (EU) were likewise wary of tariff plans, judging by a statement from the VDMA, a trade group representing 3,600 German and European machinery and equipment manufacturing companies. "Donald Trump's second term will be a greater challenge for German and European industry than his first presidency. We must take his tariff announcements seriously, in particular. This will once again put a noticeable strain on transatlantic trade and investment relations," VDMA Executive Director Thilo Brodtmann said in a statement. “The USA is and will remain the most important export market outside the EU for mechanical and plant engineering from Germany. Our companies offer the products required to implement the re-industrialization of the USA that Donald Trump is striving for. The VDMA's overall outlook for the American market therefore remains positive."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."