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Fulfilling web orders from stores wasn’t always easy for Target

June 14, 2016 09:10 AM
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Target Corp.’s omnichannel efforts earned it the 2016 Internet Retailer Excellence Award as the Omnichannel Retailer of the Year. However, it hasn’t always been smooth sailing when it comes to using its stores to fulfill online orders.

Target began rolling out services in 2013 to support its omnichannel strategy, and buy online and pick up in store and ship from store were the first steps in its “flexible fulfillment” plan.

Results were better than expected. Soon after launch 15% of web sales were fulfilled by order pickup (Target’s terminology for buy online pick up in store), about what senior vice president of supply chain transformation Karl Bracken expected. In 2015 the volume of online orders for store pick-up grew by 60%, and by 50% year to date in 2016, Bracken told attendees last week at the Internet Retailer 2016 Conference & Exhibition in Chicago.

Bracken said Target’s order pickup program was much more efficient than expected and that 90% of orders are ready for pickup within an hour, smashing the two-hour promise for orders received before 7:00 p.m. “It’s given us the capacity to take on more sales and drive customers to stores,” Bracken said. “And most often the customer will buy something else.”

Ship from store was in place in about 150 stores in 2014 and that penetration spiked to around 450 in 2015. Results have been dramatic, including cutting shipping time in half compared with orders filled by distribution centers, reduced out-of-stocks, and lower shipping costs because “shipping from a store is faster than from a fulfillment center hundreds of miles away,” Bracken said.

More omnichannel services were on the agenda 2013, including ship to store, with each building on what the company learned from earlier steps. There was still much to learn about omnichannel, Bracken said.

“We saw that leading with order pickup was the right thing to do because there was less chance of products being out of stock, it was convenient for customers, and there was no shipping charge,” Bracken said. But order pickup raised challenges, including the prospects of added payroll for employees handling orders and the additional workload in stores; adapting to new fulfillment processes; questions about whether existing technology would handle new inventory needs; worries that filling web orders could deplete store stock levels; and how to prioritize store and online customer orders.

There was also a problem with finding products ordered online in stores, despite inventory data indicating otherwise. “The ‘item not found’ rate was higher than projected,” Bracken said. “Some stores had to cancel up to 50% of online orders because they couldn’t find a product in the store.” Another problem surfaced soon after rollout: lack of space to hold online orders. Space was limited behind many stores’ customer service counters, leading some to find another location that wasn’t necessarily coordinated with customer service.

Integrating inventory systems helped resolve the former problem and remodeling some stores’ order pickup areas helped with the latter, Bracken said.

After order pickup Target, No. 22 in the Internet Retailer 2016 Top 500 Guide, moved on to ship from store, which Bracken likened to “order pickup with pack-and-ship attached at the end.” Challenges faced, and met, included picking products efficiently within stores and packing and shipping orders on time.

Target had an advantage with its omnichannel strategy in that it was able to study other retailers and learn from their process. “Being late to the game helped us avoid mistakes,” Bracken said. “We’re still not perfect today, but we continue to work on it.”

 

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