Tuesday, February 19, 2013

Retail Stores as Order Fulfillment Centers

In 2012, global e-commerce sales grew by 21.1% to top $1 trillion for the first time. It is expected that e-commerce sales will grow 18.3% to 1.298 trillion worldwide, as sales rapidly grow in Asia-Pacific region.  Sales in North America grew 13.9% to a world-leading $364.66 billion in 2012, which is expected to increase 12.2% to $409.05 billion in 2013, as more consumers shifter spending from physical stores to retail and travel websites thanks to lower prices, greater convenience, broader selection and richer product information. [1]

Today, majority of all the major retailers have an online presence where customers can order products to be delivered right to their door from the retailers’ enormous fulfillment centers. From Macy’s to Home Depot to Best Buy to Toy ‘R’ Us, retail executives are racing to speed up order delivery and improve inventory management, which if done well and efficiently, can help profit margins. Because of mounting threats from e-commerce giants such as Amazon.com, retailers are implementing efficient and cost reducing strategies to penetrate the online market. [2]

The world’s largest toy chain, Toys “R” Us, has turned all its retail stores to be able to fulfill online orders where workers pluck toys from shelves and ship them to customers, part of an ambitious but complicated strategy to use its store inventory more efficiently and gain an edge over online giants. [3]

The world's largest toy chain earlier this year began turning stores into online order-fulfillment centers where workers pluck toys from shelves and ship them to customers, part of an ambitious but complicated plan to use its inventory more efficiently. Similar all-things-to-all-people strategy is being applied by Macy’s and Wal-Mart. This can give store chains a competitive edge over online-only rivals, allowing them to ship longer during the holidays and reduce costs, and to possible provide economical same-day delivery, a huge benefit in the e-commerce industry. Additionally this will allow store chains to rapidly increase their online inventory without having to hold additional products at dedicated fulfillment centers. Toy “R” Us has a mix of dedicated fulfillment centers and retail store fulfillment centers, for its online order. A mathematical algorithm calculates whether it is better to ship from a retail store or fulfillment center based on the product’s turnover rate, inventory and shipping cost from various locations. [3]

Similarly, would it be better to have dedicated facilities for returns or have a mathematical algorithm to decide the best return location?

1.       http://www.emarketer.com/Article/Ecommerce-Sales-Topped-1-Trillion-First-Time-2012/10096492.       http://mobile.reuters.com/article/topNews/idUSBRE8BN03J20121224
3.       http://professional.wsj.com/article/SB10001424127887323316804578161813687775772.html?KEYWORDS=inventory+supply+chain+innovation&_nocache=1360882272881&user=welcome&mg=id-wsj&mg=reno64-wsj

1 comment:

  1. From the retail store enterprise, the web promoting is the simply route containing received the ideal direct exposure and also current market reveal inside the overall retail store order fulfillment product sales.


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