Omnichannel Journeys Towards omnichannel fulfillment Module 7 Video 4 Omnichannel Journeys Towards omnichannel fulfillment

Intro We now discuss journeys in the fulfillment direction. We start by talking about some of the transitions made by traditionally online retailers that have started to offer offline fulfillment, where the customer goes to the product, as opposed to the product going to the customers. Then we discuss transitions made by traditionally brick-and-mortar retailers that now offer online fulfillment, where the product goes to the customer as opposed to the customers going to the products.

From online to offline Let's start by talking about initiatives that traditionally online retailers have been taking that involve offline fulfillment, where the customer picks up the product. For example, Amazon has been installing lockers where customers can pick up their orders. A customer ordering from Amazon can choose to have the package delivered to a locker when checking out. The customer receives a digital pick-up code via email or text and can collect their package any time during the three days following the delivery. This has a twofold benefit. On one hand, this provides value to some customers, who may not be able to safely receive packages at home when they are not present. On the other hand, it can be cheaper for Amazon to aggregate shipments to one locker rather than visiting multiple customers to make deliveries. Another example is Peapod, an online grocery retailer traditionally anchored in the lower right quadrant. Peapod has started offering customers the option of picking up orders at local supermarkets of the stop and shop chain. This saves customers a delivery fee and provides customers with additional flexibility. In some cases, an online-first retailer will open conventional stores where products can be picked up. This is the case of Bucketfeet, a footwear brand that started as a pure-play online retailer and has been expanding into stores that carry inventory for immediate fulfillment. There can be a hybrid strategy too. Actually, Warby Parker uses a showroom model for prescription glasses, which have to be made to order, but holds inventory of sunglasses, which customers can buy and take with them immediately.

From offline to online Retailers that were traditionally brick and mortar are enriching their offering by adding home delivery options. For example, if you go to Nordstrom and try to buy a product they don't currently have in your size, they can try to find it at another store or at one of their distribution centers and have it shipped to your home. Most traditional brick and mortar retailers also operate online stores today that offer online information and online fulfillment. To do that, they have had to invest on distribution centers that can ship products direct to consumer. However, providing fast delivery times may require investing on multiple distribution centers. An interesting way in which several traditionally brick and mortar retailers are offering better delivery times is by fulfilling online orders from stores. For example, Macy's has been adapting many of their locations so that they can fulfill online orders. Because stores are closer to customers, this is usually faster and cheaper than shipping from a distribution center. However, doing this requires substantial investments to make sure the inventory information is reliable. You don't want to promise your customer that an order will be arriving in two days to find out later that the product is out of stock at the store that was supposed to fulfill that order. Another important downside is that inventory costs are higher at the retailer than they would be at the distribution center. Retail real estate can get very expensive, and using it as a warehouse may not be the best idea. An option is to offer store fulfillment from stores that are not in the most expensive commercial areas but have good access to the most important cities. An indirect benefit of enabling fulfillment from store is that it can be used to get rid of inventory that may be difficult to sell otherwise. If an order comes online for a product that you have in great excess in one of the stores, it may be a good idea to serve that order from that store. This can reduce markdowns and increase inventory turnover. Ultimately, the ideal would be to decide what is the best unit of inventory to use every time a customer places an order.

When is fulfillment more important? When is it most critical to excel in the fulfillment dimension? As we saw earlier that for retailers with exclusive products it is important to invest on the information dimension For multibrand retailers fulfillment can be a differentiating factor. Some multibrand companies such as Amazon have invested heavily in this dimension, and have incentives to keep pushing the boundaries by launching same-day delivery options in some areas or by experimenting with innovations such as drone delivery.