respondents came from the apparel sector, 15 percent from
“big box” stores, another 15 percent from department stores,
and the remainder from other types of retailers. Eighty-seven
percent of study participants were based in the United States.)
When asked what options they offered customers, the
respondents cited a wide array of capabilities. Topping the list
was “walk-in” returns – 73 percent of respondents said their
company provided for the return of goods ordered online to
a store. Another 69 percent said they allowed customers to
order products at the store for fulfillment from the warehouse
or DC. Fifty-three percent offered consumers the option to
order online and pick up the merchandise at the store. Forty-three percent picked orders at the store for home delivery.
Another 36 percent allowed customers to order at a store but
fulfilled that request from another store. Interestingly, 14 percent allowed customers to order goods online but let them
pick up the items at a location other than their stores, such as
a gas station or convenience store. (See Exhibit 2.)
To succeed in omnichannel distribution, retailers will have
to pick the optimum distribution path, whether it’s order in-store and deliver to home, or order online and fulfill from any
store or warehouse location. Each option has a different cost
structure that retailers need to thoroughly grasp, particularly
when it comes to the incremental value of speedy home
delivery service.
What emerged from the study, however, was evidence of a
wide gap in the cost accounting capabilities of DCs versus
stores. While most respondents could pinpoint the costs associated with various activities at the DC, few have an equally
clear picture of the corresponding costs for store fulfillment.
EXHIBIT 1
WHY DO RETAILERS ENGAGE IN
OMNICHANNEL COMMERCE?
Reasons for practicing omnichannel
Increase sales
Increase market share
Improve customer loyalty
Increase margins
Decrease markdowns
Preserve market share
Improve ability to rebalance inventory
Learn more about our customers
Decrease capital expenditures in building
new e-fulfillment warehouses
Note: Participants were allowed to select multiple responses.
Percentage
78%
73%
70%
38%
32%
32%
30%
25%
20%
S-6 A SPECIAL SUPPLEMENT TO DC VELOCITY
(See Exhibit 3.) For example, 78 percent of respondents said
they knew the cost of picking individual items or “eaches” by
stock-keeping unit (SKU) or product class in their e-commerce distribution center. But only 38 percent could pin
down the corresponding costs for the back room of a store,
and only 29 percent said they understood the expenses associated with picking eaches in the front of the store. In addition, while 70 percent said they could break out their transportation costs by SKU or product class for deliveries from an
e-commerce DC, only 57 percent had that same level of
understanding for shipments from a store.
STORE DISTRIBUTION CHALLENGES
As for how retailers are filling their online orders, the study
found that stores are playing a significant – and growing – role.
Thirty-five percent of retailers fill Web orders from stock in their
retail stores, and another 18 percent are doing so but only at
select stores. Furthermore, the study findings suggest the practice is poised to take off. Fifty-six percent of those retail respondents who are not currently filling online orders from store
stocks plan to begin doing so within the next few years.
While retailers may be shifting more of their e-commerce
fulfillment activities to the stores, it’s not clear they have the
proper groundwork in place, particularly where inventory
accuracy is concerned. Today, cycle count accuracy levels at
DCs that use warehouse management software in conjunction with automatic identification technology exceed 99.9
percent. Accuracy at the stores, however, appears to be falling
far short of that mark. Only 30 percent of respondents reported that their store inventory accuracy level was 98 percent or
higher. Another 32 percent said store inventory accuracy
rates fell between 95 and 97.9 percent, while 15 percent characterized their accuracy rates as between 90 and 94.9 percent. At the low end of the spectrum, 17 percent said it was
below 90 percent and, surprisingly, 6 percent did not measure
inventory accuracy at the store.
The study suggested that one reason for the less-than-stel-lar inventory accuracy rates was the respondents’ failure to
make use of point-of-sale (POS) information. When asked
what types of auto ID technology they used to ensure inventory accuracy at the store level, only 46 percent said they used
POS data to update their inventory systems. The majority of
respondents – 62 percent – relied on traditional bar-code
scanning on the store floor or in the back room for inventory
updating. Eight percent were using RFID for this purpose. At
the other end of the scale, 20 percent were not doing anything in this regard or did not know if their company used any
type of automatic identification in conjunction with inventory system updates. (That’s not to say these respondents are
necessarily satisfied with the status quo. Thirty-one percent of
