Many retailers, including department store giant Macy’s, are beginning to fulfill online orders from store inventory rather than through warehouses.  The benefits of this include faster distribution of inventory, the ability to test products earlier with actual buyers, and the ability to leverage existing store personnel.  In February, Macy’s announced that it would incorporate online fulfillment to 500 of its stores as part of its omnichannel strategy.

Most customers don’t care where merchandise is pulled from as long as the order is delivered accurately and on time.  Macy’s expects that its fulfillment locations will be beneficial in expediting delivery.  Macy’s is striving to potentially offer same-day delivery in some areas.

One of the main challenges of this strategy is the potential increase in out of stocks at the store level.  Furthermore, this adds to the sales associates’ workloads and potentially decreases commissions.

Retailers can develop complex algorithms to help determine which stores to pull from for what order and to maintain consistent and appropriate inventory levels.  Technological advances in POS and EDI systems also enhance omnichannel success.

Discussion Question:

What are the advantages and challenges that omnichannel retailers face when filling online orders from store inventories rather than from warehouses or distribution centers?

 

SOURCE: Tom Ryan, Retail Wire, March 29, 2013