From The Wall Street Journal:
As thousands of shoppers waited outside Target Corp. stores on Thanksgiving Day to buy toys, electronics and kitchen gadgets, workers inside were getting ready to send some of those very items out the door.
The Minneapolis-based retailer enlisted small teams of workers in about one-quarter of its 1,800 U.S. stores to pack up some of the orders placed through Target.com earlier in the day. The employees worked in shifts, in a few cases starting up to 10 hours before the official 6 p.m. store opening, navigating dimly lighted aisles and picking items to mail to customers who pounced on Web deals hours before shoppers could in a store.
The strategy is a new twist on the Black Friday weekend. What for decades had been apurely in-store shopping frenzy has ceded much ground to the Internet. A Deloitte LLP survey found shoppers expect to spend 59% of their money online for the four days starting Thursday, compared with 36% in stores. The remaining 5% is spent on catalogs.
The growth in online spending is affecting how one of the nation’s largest retailers operates on one of the busiest shopping weekends of the year. The change is born out of a need to cut down on delivery time and shipping costs to keep pace with Amazon.comInc., and to put inventory sitting on store shelves to better use by using it to fulfill orders coming from the Internet.
“With the shift online, you’ve got to take advantage of the inventory where it is and when you can,” says Rodney Sides, a vice chairman at the consultancy Deloitte.
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Mr. Cornell says shipping from store, even on Thanksgiving, is a more efficient way to get orders to customers for that last stretch, especially in lieu of heavily investing to open dozens of additional online shipping centers. “We’ll be able to have product in their doorstep in a couple of days,” he said in an interview Thursday at the Jersey City, N.J., Target store. “If it shows up Saturday afternoon, we’ll see a lot of smiles.”
Physical retailers have long grappled with managing the logistics of selling online. The problem stems from a legacy that includes hundreds of stores that must be filled with millions of pieces of inventory and manned by thousands of employees. Layered on top of that is a network of online fulfillment centers.
Amazon and other pure-play online retailers don’t have that complexity. They can spread out inventory at a smaller number of locations—Amazon says it has more than 50 distribution centers—and focus on shipping packages.
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Retailers call their answer omnichannel, a strategy that views all inventory the same and uses algorithms to calculate whether it makes more sense to ship online orders from a distribution center or a store. In some cases, customers want the order ready at a store to pick up.
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While the logistics of shipping from stores before the rush of Thanksgiving shoppers can make sense—stores will be empty, orders will be easy to find before the crowds mess up things—the financials can be a challenge. The biggest cost of shipping from store is labor, analysts say, and holiday-pay rates mean it costs at least 1.5-times more than normal. “Ship from store can turn the model upside down if you’re not careful,” Mr. Sides says.
Retailers face additional margin pressures from shoppers, who don’t want to pay shipping fees. Best Buy and Target have eliminated shipping charges on all orders for the holidays. Wal-Mart, meanwhile, has a $50 threshold to eliminate the charge.
There is also the incongruity of whittling your inventory on one of the few appointment shopping days of the year. “All of your efforts have been toward driving traffic to stores,” says Nikki Baird, managing partner at Retail Systems Research, a research firm. “Why would you then ship from stores to meet demand that’s coming from online?”
The Wall Street Journal (Link may expire)
While PG understands the theory behind omnichannel, sending employees around a store that’s set up for retail consumers vs. setting up a warehouse for optimum picking and shipping operations gives Amazon a huge advantage in efficiency. And exactly where in a Target store is an optimized weighing, boxing and shipping center?
Plus these are retail employees doing a lot of things manually, not experienced and highly-efficient warehouse employees, so each shipment is going to take much more employee time than an Amazon shipment and be more prone to error.