Blurring the Lines Between Retail and Ecommerce

Nov 16, 2015 11:09 AM By Eric Lamphier

Traditionally, brick-and-mortar retail has functioned separately from the ecommerce channel – they were two distinct silos. However, in today’s omnichannel world, with the myriad of ship-from-store, ship-to-store, and buy online/pick up in-store options, the old approach is simply no longer viable. Staying competitive means operating as one unified enterprise, across channels. This means embracing initiatives to leverage all of the inventory in a network and enabling all associates to sell the network, no matter where the inventory is located and how the customer would like to take delivery.

The challenge of blurring the lines between retail and ecommerce is magnified during the holidays. During the peak season, retailers are increasingly leaning on their retail distribution nodes to relieve the incredible stress that results from the tidal wave of online holiday orders. This includes leveraging retail distribution centers, the personnel, assets, and their familiarity with the products that are being shipped, to help the company fulfill this ecommerce demand. Breaking down the old silos and fully leveraging the material real estate, physical plant, people, and inventory in all distribution centers, stores, and hubs, is critical to improve fulfillment across the network as a whole.

Your Friendly Neighborhood Distribution Center

Large retailers often have regional distribution centers located strategically in close proximity to their store clusters and therefore a significant number of their customers.  The combination of these high powered distribution centers and the stores themselves allows innovative enterprises to compete on a delivery basis with ecommerce leaders such as Amazon. The retailers are likely to have inventory and labor available to process a portion of their ecommerce orders in order to augment their ecommerce focused distribution centers, which run at full capacity during the extreme peak season shipping period that often spans multiple weeks. During this time, ecommerce distribution centers process up to 10-20 times normal volume and retailers must be creative in how they service this additional demand. To help manage the load of these distribution centers, retailers will leverage regional retail distribution centers and the retail stores themselves to help ease the burden of increased ecommerce demand. This innovative thinking and blurring the lines between retail and ecommerce is happening with many of the largest forward thinking retailers.

Leveraging the Store and Modern Associates

In the past, retail companies considered the ecommerce channel to be a younger kid brother of sorts, but in recent years the ecommerce channel has grown to become more and more important. This is exemplified by retailers not only leveraging retail distribution centers to assist with ecommerce orders but also rethinking and reshaping the stores themselves.  Retailers are aggressively enabling a portion of their stores with new technologies and ecommerce order fulfillment expectations, effectively enabling them as hyper-connected distribution points.

As such, today’s retailers are training their store associates to facilitate cross-channel orders and returns. In addition to stocking shelves and customer-facing activities, today’s retail store employees are often required to be well-versed in picking and packing orders, as well as navigating the complex omnichannel product questions that modern, well-versed shoppers throw their way.  So in addition to the traditional retail store responsibilities, today’s store employees must also handle ecommerce business, further blurring the lines between retail and ecommerce.

Putting It All Together

In the past, inventory was in a distribution center or in a store.  Today retailers have more complex omnichannel inventory strategies that require inventory positions retail and ecommerce distribution centers, at partner/vendor locations, in hubs for rapid disposition, in third party logistics warehouses, and of course in their stores as well.  Many modern day initiatives involve connecting all of these inventory positions into a central order management system to ensure better customer service and improved inventory leverage. These strategies will allow retailers the ability to fulfill more omnichannel orders and move items from any position, be it a distribution center or a store, to the customer.

Lastly, further evidence of silo busting is found in retailers who are leveraging third party logistics handlers (3PLs) in certain geographic locations and/or certain item categories.  These 3PLs are being asked to handle inventory that may be difficult to process in a traditional distribution center, such as large or bulky products. They are utilized to the point that they may even become the regional distributor for the retailer, fulfilling the vast majority of the end customer orders.

In recent years, the rules of retail have changed, and as a result the traditional siloed approach won’t survive in the 21^st century retail world. To remain competitive retailers must operate as one enterprise across channels, leveraging their entire inventory for sales purposes. This can be achieved through leveraging all distribution centers, utilizing stores as distribution points, and outsourcing select inventory management and order fulfillment to 3PLs.