WSJ: Omnichannel fulfillment costs rising as e-commerce grows

Dive Brief:

  • Omnichannel retailers increasingly find themselves investing in their supply chains to keep up with e-commerce, the Wall Street Journal reports, citing a new survey of retailers by JDA Software Inc. that found 68% are experiencing rising fulfillment costs. The highest costs were in e-commerce shipping and returns and services like in-store pickup for online orders. 

  • That survey also found that more than half are pressured on price and speedy shipping options like same-day and two-day delivery from Amazon.

  • The paper points to sportswear retailer Finish Line, which earlier this month said it would close up to a quarter of its 600 name-brand stores and replace CEO Glenn Lyon, after troubles grew out of its new warehouse system for which it has employed a vendor to make improvements. While Q4 same-store sells fell 5.8%, the company expects a vast improvement in Q1.

Dive Insight:

This Wall Street Journal report highlights the difficulty brick-and-mortar retailers are having as they ramp up their ability to compete with e-commerce and please consumers that increasingly want to be able to shop across channels. That expectation is being amped up in part by the ubiquity of smartphones, which shoppers are increasingly using to research and, to a lesser extent in the U.S., buy.

The fulfillment web required by omnichannel includes investments in more agile software, more and better run warehouses, and employees that can fulfill orders from both stores and warehouses—costs that hit margins hard.

And it’s not clear that such moves are succeeding for the retailers, the paper reports.

“The ground is shifting beneath us, and the dust has not settled,” David Hauptman, VP of product management at third-part logistics company Geodis SA’s OHL, told the Wall Street Journal. “Nobody’s found the answer yet.”

In order to make omnichannel fulfillment pay, retailers have to have a good handle on what it’s costing them, and that can be difficult.

DSW (also highlighted by the Journal) acknowledged last year that its ship-from-store operations had been expensive, and then-CEO Mike MacDonald in March said the company was paying close attention to which stores most efficiently filled e-commerce orders. For example, the retailer had found that proximity wasn’t helping tamp down the costs of shipping from stores rather than fulfillment centers, so it switched to shipping from stores that have excess inventory of the products ordered online, MacDonald said.

Perhaps it’s no accident that Roger Rawlins, who oversaw DSW’s omnichannel strategy, became the retailer’s CEO in November upon MacDonald’s retirement.

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Filed Under: Logistics
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