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Ship from store and the future of retail

Ship from store and the future of retail

In a fast-changing world, new retail trends  come and go. But ship from store—which means the fulfillment of e-commerce orders from in-store inventory—is set to stick around for the long term. 

According to Tamarra Jenkin, Managing Director in UPS’s Customer Solutions division, ship from store is playing an increasingly important role in the modern retail mix.

"Most of the large retailers have either introduced a ship from store model or are evaluating moving in that direction after the implementation of a buy online, pickup in store process," she says. “The evolution continues: even the retailers who have offered ship from store for several years now still say they’re refining the details of their implementations."

The emergence of ship from store

The rise of ship from store as a fulfillment model reflects the growing convergence of e-commerce with brick and mortar stores.

It wasn’t always the case. When distribution centers only served retail stores, life was relatively simple for the retailers. Along came e-commerce, and everything changed. “Consumers buying individual items online posed new logistical challenges for the retailers,” Jenkin explains. “Items that were previously shipped in bulk from the distribution centers to the retail stores now needed to be picked and shipped individually to fulfill online orders.”

E-commerce distribution centers emerged in response, sometimes initially a corner of the regular distribution center. Eventually, as e-commerce became bigger and retailers wished to serve customers in regional areas faster, they opened dedicated e-commerce distribution centers. In this way, e-commerce fulfillment evolved as a separate division for retailers and became isolated from the main revenue driver for the company, which— for the most part—remained the stores.  

The situation was hardly ideal. E-commerce databases often proved more limited than their in-store counterparts, resulting in stockouts and lost sales. End-of-season items would sometimes show as out-of-stock online, even though the same sweater was sitting in stores around the country, quite possibly on clearance racks.

Weighing the benefits of ship from store

With a well-functioning ship from store program, both the retailer and the shopper stand to benefit in defined ways.

For the retailer, using store inventory to fulfill e-commerce orders can help clear end-of-season inventory while avoiding retail markdowns . For the online shopper, they gain access to not only what is in the e-commerce distribution centers but on store shelves and backrooms. 

“It may make more sense to ship a jacket still on the shelf in Atlanta in March to a customer in New York, even though stores in New York still stock that item,” says Jenkin. “That item may otherwise sit on the clearance rack in Atlanta for a discounted price taking up valuable store space.” 

Ship from store also helps meet growing customer expectations around next-day delivery, a major driver for retailers developing a ship from store program. By pushing orders to local stores that have the inventory available, the shopper may receive the item faster rather than shipping an order from a distribution center that’s further away.

The ability to extend reach and reduce shipping distance is powerful. “With five shipping locations, a retailer can deliver to 98% of the U.S. population in two days with UPS Ground,” she says.

Tips for testing and implementing ship from store

Despite the challenges, the upsides of successfully implementing a ship from store program are significant, says Jenkin, who gives the following pieces of advice to retailers figuring out how to launch a program of their own:

1. Gain the support of store operations

Store operations provides the labor and is responsible for accurately fulfilling online orders pushed down to them, so it’s important that the store gets the credit for picking the order. A dual or split crediting system should be designed so the store team doesn’t feel as if they are donating labor to the digital team’s revenue numbers. When store associates understand their new role in the organization and the importance of accuracy and speed, implementations are successful.

2. Define store metrics

Are the stores expected to fulfill the order the day it is dropped to them? How long do they have to reject the order if they cannot locate the item so that the order can be sent to another store or back to the DC? These are common metrics and KPIs that a retailer needs to define.

3. Create packaging guidelines and training

Deciding how many carton sizes to store and then training the associates on how best to select package sizes and to package items is a key element of ship from store success. The unboxing experience is a crucial part of online buying, so items need to be packed safely and efficiently. Keep in mind that many store associates may not have previous shipping experience.

4. Select stores wisely

It's very common for a retailer to turn on a subset of stores first, and tweak business rules and procedures before a full rollout. Also, for retailers with a large footprint, they don’t need to ship from every store to achieve nationwide coverage. “21 stores in major metropolitan areas will cover the country with next-day UPS Ground service, although it’s likely such retailers will deploy anywhere from 50 to 100 stores to balance out inventory. What you don't want is to jeopardize the availability of inventory in store for walk-in customers."

5. Rationalize the store inventory offered

Ship from store can be a better option for certain items or orders than others. Footwear can be challenging to offer, for example, because of the number of sizes that retailers need to keep in stock per SKU to ensure the walk-in customer has a good experience. Fragile items, like glass, may be better packed by the professionals in the DCs. Apparel is a great starting point.

6. Devise smart rules for inventory

Inventory moves around within a store—just think of the pile of clothes at the entrance to a fitting room. To account for this, retailers must use their inventory management software to devise rules, such as, “only push an order to a store if multiple items are in stock” or “drop the order to the distribution center if it’s a multi-piece order and no store carries all the items.”

7. Support picking through technology

Finding inventory within a store quickly is still a challenge for most retailers. Imagine staring at a bolt with no barcode trying to determine if it’s the correct part. “Without technology, associates are often having to manually look at SKU numbers on a pick ticket and then visually compare them against labels. Now, for the best-in-class retailers, tablets visually display a picture of the item and offer scanning for accuracy confirmation, which can make picking much more efficient,” says Jenkin.

8. Offer other shipping options as well

Offer ‘ship to store ’ and ‘buy online, pick up in store’ as alternatives, or complements, to a ship from store program. "Sometimes consumers prefer to go to the store, but before leaving the house they want confirmation that the item they intend to buy will be available," says Jenkin. For the retailer, ‘ship to store’ and ‘buy online, pick up in store’ can save on shipping costs and drive in-store traffic.

Expert support for ship from store programs

Developing a ship from store program isn’t easy, and retailers will need all the help they can get. UPS offers deep expertise in retail management and can assist retailers implement their ship from store programs in many areas, including:

  • Determining the ship from store footprint: How many stores, and which ones, are needed to create a one-day or two-day transit model?
  • Retail inventory management : How much inventory to store in the distribution centers versus the stores? How much safety stock to keep?  
  • Packaging optimization and training: Store specific analysis on how many carton sizes to keep in store and what packaging filler to use. 
  • Systems for manifesting: UPS offers fully integrated technology, including support with hardware deployment, so that store associates can print labels easily and accurately.
  • Business process design: Designing procedures and training manuals to ensure associates are working as productively as possible and that the customer experience, from online ordering to fulfillment, is optimal.

“UPS has helped many large retailers that have gone live with a ship from store model in multiple ways, from the basics such as deciding the best time for driver pickup or help with UPS label creation technology all the way to detailed business rule and process design,” says Jenkin. “We use our expertise to help small and mid-size businesses as well.”

Ship from store and the evolution of the shopping experience 

E-commerce and brick and mortar retail will continue to converge, with the ship from store model a central feature of this convergence. As consumer expectations increase, physical stores give retailers the footprint they need to fulfill same-day and next-day orders without heavy additional investment.

“It’s a fascinating time in the industry overall, especially when we see formerly internet-only retailers—Bonobos, Amazon, even Wayfair—opening stores,” Jenkin says. “There has also been a flourishing of outlet stores as a way for retailers to sell last-season inventory and e-commerce returns. Retailers are experimenting with pop-up and display-only stores too. Shoppers can browse items and place a digital order while in store or at a later point.” 

“The brands that are going to thrive are the ones that promote the best experience for consumers over and above what everybody else offers," she concludes.

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