Moving Distribution Centers to Storefronts
By Fran Stevenson, Director of Strategic Accounts
E-commerce companies like Amazon have transformed customer expectations with features like a seemingly boundless inventory and same-day delivery. Although this has left many retailers grappling to compensate for their limited offerings, bigger retailers have become savvy by transforming storefronts into mini distribution centers.
Large retailers, such as Macy’s, have implemented sophisticated inventory and fulfillment systems to speed up delivery time and provide the option to buy online and pick up in-store, which can lead to additional purchases once the customer is in the store. For customers that are too far from a Macy’s store, the system can find the closest store and pay shipping across one or two zones as opposed to shipping across five zones from a central warehouse.
As more customers become omni-channel consumers – from storefronts to websites and mobile apps – it’s become paramount for retailers to create a seamless shopping experience across channels. Previously online-only brands like Warby Parker and Bonobos have capitalized on this trend by opening storefronts in recent years. Warby Parker, which sells chic eyeglasses, has seen a considerable profit from opening eight stores in trendy neighborhoods across the states. The company’s co-founder and co-chief executive, Dave Gilboa, told the Wall Street Journal that the stores sell an average of $3,000 a square foot annually.
With omni-channel shopping evolving how consumers shop, retailers must not only adjust their sales strategy, but also their distribution methods. This could mean physical changes to their existing storefronts, such as dedicating more space to back stock. Others are partnering with third-party logistics providers, or 3PLs, to outsource their e-commerce fulfillment operations. This allows customers to pick up their orders from convenient locations like train stations, convenience stores and airports.1
The shifting retail landscape continues to impact the physical landscape of storefronts, warehouses and distribution methods. Retailers must consider how to fully integrate their physical and virtual channels and consider more sophisticated supply chain management technology to meet consumer demands.
1Sershon, Katie (2015 January 12). Four Retail Distribution Trends to Watch in 2015. Retrieved from http://www.jllblog.com/retail/2015/01/12/four-retail-distribution-trends-to-watch-in-2015