This article originally appeared in the March/April, 2018 issue of PARCEL.
With online sales continuing to grow at double-digit rates, retailers are looking for innovative solutions to improve their customer’s experience as well as minimize costs. A trending strategy is the implementation of ship-from-store (SFS) fulfillment. This fulfillment model benefits brick and mortar retailers by improving speed-to-customer, capitalizing on existing retail store inventory, and reducing costs associated with fulfillment, such as shipping.
Cost reduction is at the core of this fulfillment strategy, and it is imperative for retailers as price wars are waged through online marketplaces. Let’s take a look at one opportunity to reduce cost by analyzing the economic impact to deliver a 30-pound package being shipped by FedEx. A Zone 5 shipment, sent from a centralized fulfillment center, for that package would cost $21.84, while a Zone 2 shipment, sent from a local store, would only be $14.28 — a 35% difference! Multiply that out over thousands of packages, and it’s easy to see how the financial impact to the retailers becomes significant.
Time to Embrace the Cross-Channel Experience
As consumer behavior is changing, retailers can no longer expect potential customers to walk in their stores for certain items. Products that are difficult to get home (large and/or heavy), as well as consumable products that need replenishment, are likely candidates to be ordered online and fulfilled directly to the consumer’s home. The good news for brick and mortar retailers is that a positive online experience strengthens customer loyalty and drives them back into stores for items that consumers prefer to see and touch prior to purchasing.
By focusing on cross-channel customer experience, brick and mortar retailers also leverage their distinct advantage over pure-play e-commerce retailers – their stores! This advantage is not only in the physical store experience, but also in the opportunity to use the locations as mini-fulfillment centers.
Challenges Implementing SFS?
If this implementation feels daunting to you, you’re not alone! One significant challenge is dealing with space constraints. Retail stores typically have fewer than 1,000 square feet of back-of-store space, and that space is most likely already allocated to another activity. A dedicated space is needed to process and stage orders, store packing materials (boxes, tape, cushioning, void fill, labels, etc.), and house a packing station and a holding area (between 50 and 500 packed boxes) for parcel carrier pick up. The latter can be particularly challenging over busy weekends, when boxes accumulate prior to Monday pickup.
The next challenge is the picking process. In a store environment, picking is done from shelves or hanging racks. This is typically less efficient than the pick-and-pack from bins that takes place in fulfillment centers.
Both picking — and the packaging process that follows — is further complicated by retail store employee tenure and skillset. With retail tenure frequently less than two years, coupled with the influx of seasonal workers during peak holiday periods, labor force skills and training play a significant role in the success or failure of SFS programs.
Store associates have duties that are diverse. They can range from manager, cashier, customer service, shelf stocker, and others. Unlike fulfillment center employees, they are not trained or focused on “pick-to-ship” activities. Without proper repeatable, standard packing procedures, this can result in higher damage rates, expensive repeat fulfillment, and negative impact to reorders and lifetime customer value/retention.
Potentially higher shipping costs also come into play when the retail store employee packaging selection negatively impacts dimensional shipping weight costs.
Packaging decisions also can be negatively impacted due to extremely tight space constraints. The store may be forced to limit the number of box sizes available, as well as reduce the number of cushioning and void-fill options.
Six Tips to Be Stellar
Currently fulfilling from store or thinking of implementing? These process and packaging tips will help you avoid mistakes others have made in the past!
1. Simplify the Process. Seems obvious, but there is often a disconnect between stores and corporate over what is supposed to happen and what actually happens. The process for picking and packing needs to be intuitive and supported by standard operating procedures. It should also be easily scalable to meet peak requirements. Choose the smallest number of packaging mediums to limit store employees’ opportunity to make mistakes. Also, focus on ease of use for employee and time required to pack.
2. Maximize Space. First, determine how much space is available for packing at each retail store. Minimize space requirements to leave room for revenue-generating activities. Choose packaging that requires minimal storage space. Even better, choose one which can be on-demand and almost eliminate storage requirements. An additional savings from on-demand packaging may come from reduced inbound shipping expenses.
3. Deliver Trust and Excitement. The consumer experience begins with unboxing. Your store employees are brand ambassadors when packing – ensuring your customers’ brand experience is positive when they open the box. Make employees aware of their important role. Aesthetically pleasing packaging increases perceived product value and connects customers to your brand. All of these factors contribute to increasing customer lifetime value (and your marketing team will love you!).
4. Save Some Dough. Parcel shipping charges used to be solely driven by weight. Now, it is a combination of box size and weight. Oversize, non-conforming packages are also subject to additional handling surcharges. It is critical that retailers understand the impact of the physical characteristics of their packages on shipping costs. Choosing the right packaging oftentimes reduces parcel charges.
5. Free Up the Phone Lines. Your customers dread spending time requesting a replacement product because the original arrived damaged. You hate paying not only for extra customer service, but also the replacement cost, including: shipping, packaging, warehouse labor, and product. It is expensive to repeat fulfillment and even worse if that customer is lost due to the negative experience. Selecting the right packaging (cushioning, block/brace, surface protection, wrapping, void-fill, etc.), will help you reduce or eliminate these occurrences.
6. Total Cost over Price. Stop using price per foot to compare packaging costs. This is old school. What you’re seeking is the lowest cost to adequately protect your products during transit – your process for evaluating packaging cost should reflect this. First, figure out the required material usage for each packaging medium per pack (even two types of the same packaging medium, such as paper, can be significantly different). Also consider things like processing labor and likelihood of damage.
Mind Blown; Now What?
Hopefully you pulled a couple of pointers away from this article to consider as options for improving your SFS fulfillment strategy. Start off by getting input from your store employees – not the managers, but the actual packers. How can you make their activities easier, more efficient, and repeatable? Next, order a number of sample packages from your different locations to see what the unboxing experience is like. Is it consistent? Then, make some new friends. Other retailers, industry professionals, and vendors can all offer additional perspectives on challenges. SFS fulfillment is constantly evolving, and your process should as well.
Ryan Germann is eCommerce Segment Manager at Pregis, a leading provider of innovative protective packaging materials, equipment systems, and surface protection. The company provides solutions for a wide variety of consumer and industrial market segments including food, beverage, healthcare, medical devices, agricultural, e-commerce, retail, automotive, furniture, electronics, construction, and military/aerospace. For more information, visit www.pregis.com.