We are all well aware that retailers have taken a hit from COVID-19 due to mandatory store closures and reduced consumer demand. The resulting financial hardship has resulted in furloughs, layoffs, and even bankruptcies. Nevertheless, during this unprecedented time, retailers have been able to utilize e-commerce and omnichannel capabilities like ship-from-store and buy-online-pick-up-in-store to capture as much demand as possible in order to survive. So what can retailers do to maximize opportunities like ship-from-store and buy-online-pick-up-in-store and work to recoup lost demand in the back half of the year? And how can they start to prepare for what comes next?
Ship-from-Store To Maximize E-Commerce Demand
Although ship-from-store (SFS) as a selling channel has become increasingly adopted by retailers in recent years, it has served as something of a “golden ticket” in the COVID-19 era. Based on our internal industry data, year-over-year growth for ship-from-store was up +14% for the beginning of the year and maintained up +12% during March and April 2020, despite lower overall retail demand. Ship-from-store both serves to sell inventory trapped inside brick-and-mortar locations during this time and also to drive demand.
Coming out of store closures, ship-from-store fulfillment will become even more critical. As stores start to re-open, there will be continued reluctance on the part of consumers to visit store locations. Consumer comfort level and eagerness to “get back to business as usual” will vary and be unpredictable by geography, creating imbalances across the network as historical demand and distribution models prove unreliable. The need to turn store inventory (no matter where that inventory is located) and fuel ship to home demand will continue to exist.
A silver lining of COVID-19 is the accelerated consumer confidence and comfort in ship-to-home delivery as a way of life (across demographics). Raising the bar on customer experience will be critical in maintaining brand loyalty, especially as many customers have become reliant on Amazon as their primary shopping destination over the past few months. Ship-from-store can drive the highest levels of customer experience through providing customers with maximum online availability, minimizing stock-outs and customer cancellations, and ensuring timely delivery.
At the same time, challenges will certainly arise in driving ship-from-store operations in a post COVID world. For one, a potentially smaller workforce upon reopening stores will drive the need for new procedures and require more time spent cleaning, sanitizing, and organizing store space. There will be a need to minimize labor cost associated with ship-from-store as well as balance those costs with the actual capacity to fulfill — all while continuing to find ways to motivate store employees. These obstacles can be overcome, but it will require clear strategies, goals, KPIs, incentives, and technologies to do so.
Buy Online Pick-Up In Store / Curbside Pick Up
We have heard from many of our retail clients that buy-online-pick-up-in-store (BOPUS) and curbside pick up will become a requirement post COVID-19. During the COVID timeframe alone, we saw buy-online-pick-up-in-store revenue skyrocket +326% from the year prior for retailers who were able to operate BOPUS during March and April. This compares to +26% in the first two months of this year. It seems clear that the ability for customers to view and shop all store inventory online, order directly, and pick up from their local store within hours will be table stakes going forward. Additionally, for consumers with concerns around stolen or lost deliveries, BOPUS offers a convenient, secure way to shop merchandise without spending time in a store.
With lingering concerns around outside-of-home interactions (even after stay-at-home mandates are lifted), the concept of “contactless curbside pick-up” will continue to gain popularity. Contactless curbside pick-up allows customers to drive to the store and pick-up their merchandise without having to enter the store or even directly interact with a store associate. This can take the form of pick-up lockers or deliveries right to the customers’ car or trunk.
Similarly to ship-from-store, mobilizing buy-online-pick-up-in-store or “contactless curbside pick up” will have its challenges — particularly regarding labor cost, given that most successful BOPUS programs require dedicated store employees due to faster turnaround times required for picking and preparing orders for customer pick-up (also with contactless pick-up requiring pickup employees to spend time outside of the store). However, if done correctly, a strong BOPUS strategy during this time will pay off in spades. In addition to providing another channel for consumers to retrieve merchandise, we have found that the mix of product purchased through BOPUS often differs from SFS (allowing retailers to sell thru different types of inventory). For example, the AUR for BOPUS programs tends to be higher due to purchases on items like electronics, workout equipment, outdoor furniture, higher-priced apparel, etc. where customers are less comfortable receiving via ship to home or do not want to pay for the shipment charges. Additionally, there are strong attachment rates associated with BOPUS, where customers will typically add other items they need to pickup given they are making a trip to the store. Therefore, when executed correctly, BOPUS can both reach more customer groups, support in selling a more diverse set of inventory, and drive increased revenue.
Inventory Visibility & Flexibility
The connective tissue that supports multi-channel demand (e.g., SFS or BOPUS) is a single view of inventory across the retailer’s network of stores and fulfillment centers. Most importantly, it provides transparency and convenience to customers, who can view inventory through the lens of their own convenience, and shop based on what’s available at the time and place that’s easiest for them. It also enables the retailer to have full control over inventory and how they want to sell that inventory by allowing systems and business owners to easily access and update it.
This will become critical in the aftermath of COVID-19, as retailers demand visibility and flexibility while assessing the need to shift inventory around the network. These shifts include store-to-store, store-to-DC, and DC-to-store, as well as write-off and 3rd party selling activities. Instant and high-accuracy access to what is available and what is not available within the network is a key requirement to fuel capabilities like ship-from-store and buy-online-pick-up-in-store — as well as make informed decisions about how to manage the inventory in the network.
Retailers are also expecting hefty returns post COVID-19 from customers who have likely been reluctant to visit stores or the post office. Many of these returns will go directly to stores, creating a further imbalance of inventory across the network. This influx of old inventory (where some retailers are allowing for no time limit on returns due to COVID-19) will need to be tracked on an ongoing basis and managed accordingly. Inventory visibility is obligatory here in working through excess inventory that may accumulate in the network, as well as isolating and handling aged inventory.
Technologies & Tools
All of the above capabilities and scenarios are supported by technologies that enable the retailer to sell products where and how it’s needed in order to drive the business. These technologies will be even more requisite in a post COVID-19 world:
· In-store fulfillment and markdown optimization
· In-store inventory availability and fill-rate optimization
· Real-time unified inventory
· Advanced retail order management
· Staff efficiency tools (e.g. product locators, mobile picking & packing)
· Automated curbside and BOPIS solutions
Onera supports a number of these technologies within its unified inventory platform. Please reach out to us at firstname.lastname@example.org if there is any interest in discussing or exploring any of our products.