Using store locations as fulfillment centers and warehouses: What companies need to know
In today’s increasingly digital and on-demand world, eCommerce has been a hard driver of the changing retail landscape.That changing landscape has found most brick-and-mortar stores rethinking business models—not only to provide more convenient shopping options for customers, but to better leverage often large physical infrastructures such as their network of store. One growing use in retail operations today is using physical store locations as warehouses or fulfillment centers. And as we'll examine, they don't have to be stereotypical, larger-than-life buildings to play out a role as busy centers of delivering on consumer expectations and experience across channels.
Using store locations as fulfillment centers/warehouses, lets retailers provide more flexibility in delivering shopping experiences for consumers, including serving as a distribution point for eCommerce and mobile transaction (e.g. the buy online/pick up in-store play). That capacity provides not only for easier pick-up options, but faster time-to-consumer—especially for the consumer who wants to buy online and have product in their hands within minutes or hours, versus days.
If you're considering using retail store locations as fulfillment centers or warehouses, here are just a few important things to consider before making the jump:
1. Deciding what your warehouse model looks like
The very first thing you will need to consider when transitioning into a multi-use store is what your fulfillment or warehouse model will look like. Typically, when you think of a warehouse, you probably envision a large industrial building filled with shelves full of inventory and products. There's a good chance, however, that your stores don't have the capacity to become full-stacked warehouses without disrupting other elements of your operations. That doesn't stop you from tapping into consumers' tendency to showroom or webroom, while using your stores' selling floors as mini-fulfillment centers for customers buying actively online or by mobile.
For example, JCPenney has a “jeans bar,” which looks like a mini-warehouse, but it's located directly on the sales floor. Employees can “shop” the inventory on the sales floor while putting together online orders and then taking the items to a packing station where another employee prepares them for shipment. Rather than expanding the existing store location to include a larger storage area for additional products, JCPenney uses the existing store infrastructure to their advantage by providing a multi-use space where customers can shop in-person or employees can fulfill online orders for delivery or quick in-store pick up.
2. Identifying new employee roles
If you plan to use your store location as a warehouse or shipping fulfillment center, you'll need to identify which new positions you may need to create to keep operations running smoothly and cost-effectively. Though you may be able to redirect some current staff to online fulfillment, you don't want to compromise your in-store customer service experience. Instead, consider how many new employees you'll need to re-allocate, re-train or hire, as well as what their core tasks will be across spectrum of order fulfillment to shipping.
Using your store location as a warehouse may also require you to hire additional customer service personnel to handle customer calls and questions about orders and shipping information. These are support functions that might also be handled more centrally, based on the complexity or interconnected nature of your operations. Determine ahead of time which roles will require new hires and which roles can be filled with current employees. For instance, you may want to cross-train some current employees to track inventory, re-stock items, and fulfill online orders.
3. Revamping inventory processes
One of the most important considerations when it comes to using your physical store location as a warehouse or online fulfillment center is inventory management. Fulfilling online orders from your store will only offer a competitive advantage if you have an accurate understanding of what inventory you have available and efficient processes to replenish inventory based on customer demand. Customers expect online inventory information to be correct and up-to-date. If they see online that a product is in-stock within your physical store and arrive to find that it is not available, you've put a rip in seamless commerce. That leads to disappointed customers and lost sales.
Start by taking a look at the way that your store currently handles inventory. Do you have a system in place for automatically updating inventory levels online? What process do you use to tell if you have more of an item in your backroom or warehouse? You need to have a solid inventory system in place before you start to fulfill online orders from your store location. Many retailers use RFIDs to help improve inventory management, which allows staff to see if an item is in the backroom or in another location.
4. Offering local delivery and pick-up options
Another factor your company will need to consider is whether you plan on offering local delivery or in-store pick-up. This can be a convenient option for customers who live close to your facility and want to get their items quickly. Many retailers already provide in-store pick-up where customers can view the inventory online, choose the items that they want, pick up the order at the store within a few hours, and make their payment either online or in-store. This is the ideal option for customers who live close and want to get their items quickly without spending time in the store.
Another option that you may want to provide is local delivery. Whether you provide this shipping option for free or a small fee, it will help your retail store compete with eCommerce companies that are offering same-day or next-day shipping. If you decide to offer this option, then you will need to consider the logistics and costs of providing local delivery as well as how far you plan to extend this service. Many larger retails have begun experimenting with this via popular cars-for-hire and other existing delivery services.
5. Transforming more than one store
If your company has more than one physical store location then you will also need to consider which locations will serve as warehouses or online fulfillment centers. Making eCommerce fulfillment a part of every store can become expensive and time consuming due to the amount of infrastructure and labor needed to make it happen. Instead, you might choose the stores that already have the room and staff needed to serve as online fulfillment centers. Store locations with ample backroom space and additional staff may be easier to transform than smaller spaces.
When considering which store locations to use as online fulfillment centers, you may also want to consider the markets and geographical locations of the stores. For instance, if you have a large store in a metro area that makes up a large percentage of your sales, this may be a great candidate for a multi-use store location as it will make it easier to offer convenient pickup and shipping options for many of your customers.