5 reasons retail needs ship-from-store retail; consolidation
Tuesday, October 3, 2017

Categories: Order Consolidation

5 Reasons Retail Needs Ship-from-Store Order Consolidation

Most, if not all, current standard order management systems have a serious flaw. That flaw is a lack of ship-from-store order consolidation capabilities. Until recently, there was no need to consider this extremely challenging function. However, we are now at a phase of modern retail, that demands this feature. First, lets look at what order consolidation is and then the five reasons retail needs it.

What Are Ship-from-Store Order Consolidation?

Ship-from-store order consolidation is a feature of the most advanced order management systems. It allows retailers to consolidate multi-item orders into one single box and one single shipment to customers. This sounds straight forward enough, but in reality most multi-items orders get complex, very quickly. Order consolidation brings inventory into one single location, if there is not enough inventory to fulfill the complete order from any single store location.

Ship-from-store order consolidation reduces the cost of shipping goods to fufill a customer order.

By giving a minimum order size to get free shipping, it encourages consumers to add a few more items to their online shopping basket. Generally, this is a good thing. It increases the average order value (AOV) for the retailers. However, retailers trying to leverage in-store inventory are at risk of their systems splitting the order between two, three or even four stores, each with part of the inventory to fulfill the request. In these cases, the result can be shipping fees that exceed the value of the order and value of the goods themselves. That pulls margins into the negative territory. That’s NOT good for business.

Fortunately, the ship-from-store order consolidation feature is in the OrderDynamics solution. Currently, there are only two other vendors capable of ship-from-store order consolidation. The other two vendors’ features are designed and only deployed in the most expensive and largest multi-thousand store retail chains. The good news is that OrderDynamics’ solution is available and accessible by all medium and large retailers. Now, lets have a look at why you need order consolidation.

1. Reduces Shipping Costs

No debate here. As expressed above, ship-from-store order consolidation reduces the cost of shipping goods to fulfill a customer order. Instead of shipping two, three or four boxes of goods from various store locations with partial inventory, it consolidates all inventory to one location, into one box. It then lets the retailer do the smart thing, by shipping one customer order, once.

Granted, there is still a cost of collecting all the goods from each store, and shipping it to one collection point. This is true, however, most retailers have runner vehicles that bring fresh new inventory to the different stores, on a regular basis. These runners, can also do these store-to-store transfers. By using runners to bring inventory to a single point, the retailer is not adding costs to the system. Rather they are using a resource that is already available, but doing so more effectively. This cost is significantly lower than the cost of shipping multiple boxes the last mile to each customer.

Given that all retailers want to increase the AOV of online orders, store order consolidation reduces costs, thereby increasing margins. All in all, great for business.

2. Consolidation Reduce Environmental Impact

Ship-From-Store Order Consolidation - Image of Retail LogisticsSome great examples of retailers focusing on reducing their environmental impact are H&M, HP and The North Face. H&M promotes its program, H&M Conscious, ‘for a more sustainable fashion future’. The North Face promotes its program ‘Clothes The Loop’ for its sustainability effort. Both brands promote recycling, and reusing old clothing as core material to be recycled for future products. They may end up as wash cloths and rags, but they avoid adding to the growing garbage problem the world faces. HP is continually trying to reducing its environmental impact by recycling its ink/toner cartridges, and electronic waste.

Clearly there is a growing environmental movement. It is important to consumers. As such, a growing number of consumers are also becoming watchful of wasteful practices by retailers. With the growth of online orders and deliveries, this will become a growing interest among shoppers.

Again, although order consolidation does not address the overpackaging issue, it does ensure that a standard shipping box contains more goods in a shipment. When a multi-item order is shipped in its entirety, it means the shipping packaging is better proportioned, compared to the items it contains.

 

Retail Order Consolidation Brief

 

3. Less Brand Embarrassment

Order Consolidation - Retail LogisticsHaving a high shipment to order ratio isn’t just bad for margins, it is a potential brand embarrassment. Brand shaming on social media, and in blogs are happening more frequently. Although we were careful not to identify the retailers, our earlier post about getting 7 pairs of socks and 2 lipsticks shipped in three separate boxes over the course of three days, is a great example of brand embarrassment potential. Many consumers would not hesitate to identify the brand, point out the comical nature of the series of wasteful deliveries, and document the whole thing on social media. Store order consolidation avoids this problem altogether.

4. Use Hub & Spoke Ship-from-Store Model

Most retailers are not using advanced omni-channel strategies. Store order consolidation as a feature lets retailers use more advanced techniques. By consolidating orders into one store location, retailers have leverage inventory even in smaller stores, to improve their overall efficiency, and increase stock turn. Store order consolidation can bring partial order merchandise to a hub location. A hub store may be a larger footprint location, with enough room for a pick, pack and ship, processing area. It means retailers can have multi-sized stores, yet leverage the inventory at all locations, rather than only those from large sites.

Using store order consolidation, also drives up the efficiency of a retailers’ overall omni-channel strategy. Having larger hub stores for pure online order fulfillment, also means the retailer can improve their efficiency, by having specialized staff for the pick, pack and shipment processing.

5. Most Customers Willing To Wait

Store order consolidation can bring partial order merchandise to a hub location.

Endicia recently pointed out that shoppers are often willing to wait for non-urgent product orders. They highlight that “25 percent of people surveyed stated three days was an acceptable timeframe. Further, 9 percent said four days was all right, and 16 percent were OK with five days.” In this respect, customers will be more pleased to encounter a brand and retailer that used their head in shipping an order. If in doubt, ask the customer and give them the option to either ship right away, or to consolidate the shipment into one box – at the risk of it taking additional time to arrive. Giving customers more choices on these smarter shipment options might even have a positive effect on your brand.

Next Steps

There are ample reasons for retailers to want to use ship-from-store order consolidation. It is about increasing margins, being efficient, reducing the impact on the environment, protecting your brand, and simply running your retail business, intelligently. It makes an impact on your customers, and your business. Ask your vendor about whether their order management system has full order consolidation capabilities. If order consolidation is not part of a OMS feature set, then look for a vendor that can provide it, like OrderDynamics. Order consolidation is an investment in the future, in more ways than one.

 

Author:

Charles Dimov - Director Marketing OrderDynamicsCharles Dimov is Director of Marketing at OrderDynamics. Charles has 21+ years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics.

 

 

 

Related:

Retail Order Consolidations: How To Make Shipping Orders Pain Free Get the Competitive Advantage with Ship To Store What Exactly is Retail Order Consolidation?