Item — HN Reader

>I got a buddy who works for DSCO, a company which, among other things, sells software that makes it easy for brick-and-mortar stores to sell products online and have the products ship from the retailer's warehouses.

I always wondered why more stores didn't do this. I had Best Buy have another store ship directly to my home when phones I wanted to buy weren't available in the local location, Bealls Florida fulfill an online order from three different retail stores, and I think I read a while ago of Walmart planning on doing this to fight Amazon Prime 2-day shipping but, otherwise, any online order would come from some warehouse somewhere no matter how many or few retail locations that company had near me. Your friend's experience of companies trying (and mostly failing, obviously) to build such capability inhouse would help explain this.

Such capability would also help retail customers by improving the accuracy of in-store inventories that appear online.

2 comments

>I always wondered why more stores didn't do this.

It's not an efficient way to ship stuff. Wandering around a store picking an order takes much longer than an optimized warehouse.

Square footage is much more expensive retail than in a warehouse. So the area (if there's even room for it) where you pack and ship stuff costs more.

Shipping is more expensive because you are doing a few boxes a day instead of a semi-truck a day to UPS/FedEx/USPS

It just doesn't work that well. Fine as a stop gap for a small retailer dipping their toes in the online market. But for any sort of scale the warehouse model is much better.

I think the article is way off here. Yeah, some Sam's Clubs in the middle of nowhere were converted and a high end retailer has the margins to absorb the inefficiency. But the idea that existing retail is going to convert to warehouses at any sort of scale is laughable. The real estate costs are prohibitive and they'll end up somewhere an hour away where land is cheap.

I’d add that order picking from retail shelves is pretty disruptive to retail customers with any volume. Every trip to the grocery store sees the popular aisle clogged with an employee picking 6 or 12 orders. Meanwhile the in-person customers stack up waiting for the picker to finish. It wouldn’t be so bad except the stores also put all kinds of impulse buy islands into the flow of traffic so that you can’t even transit the block.

IMO stores should pick by department, not order, then in the back room use put-to-light to divvy up the picks.

Let me clarify. I agree that in general having a centralized warehouse handle online orders is better than having retail stores do so, for the same reason why FedEx and UPS are more efficient in using a central transit hub in Kentucky/Tennessee even for an overnight package going from one location to another in the same city.

But surely even better is both? Have an online warehouse handle most orders, but have the inventory system integrated across warehouses and stores, so that if it turns out that an item is a) available in a store in the same metro area as the customer, and/or b) is out of stock in the warehouse, a store employee can pick and pack the order during a free moment and have the order arrive at the customer the next day?

Retail usually operates on thin margins. It's probably not cost effective to do that.

Wouldn't delivery be cheaper? Why are they shipping locally?

I'm guessing having your own delivery trucks would be cheaper, but only if you're doing enough volume (like, multiple packages per neighborhood per week). Walmart could probably get there, but not sure about smaller stores (even Best Buy).

They also have to be shipped to the store. End-to-end shipping costs won't be that different between the warehouse model or the retail model.

Hmm so why set up shop in a retail outlet then? Why not just ship directly from the warehouse?

If i'm understanding, the article is talking about using the retail outlet as a warehouse, where you have the items shipped from a warehouse to your retail outlet, and then shipped again to buyers.

The reason is that retail stores don't have the space to store products and it's expected by the consumer that when you walk into a store products should be in-stock. All inventory at a retail location is supposed to be just-in-time and for the area that they service so they do not support the warehouse model. Store like Hot Topic here in the US have been shipping from stores for some time and the idea behind this is that both warehouse and retail adhere to the just-in-time model.

That way product is no more likely to sit in a warehouse than it is at the retail location, there's no ship backs and markdowns are taken at the retail location. As a result inventory stays fresh and there's little to no overstock.

This does not work for all retailers as you can imagine, for for boutique stores with a limited number of SKU's it's enough to keep them afloat while still turning inventory and keeping retail locations staffed.