Shipping from stores helps Target level the playing field with Amazon

October 28, 2015 03:29 PM

By turning stores into mini e-commerce distribution centers, retail chain Target Corp. has improved the speed at which customers receive online orders.

The percentage of online orders delivered by Target within two days increased to 26% from August 2014 to October 2015 from 2% during the period of April 2012 to July 2014, according to a report from customer service monitor StellaService. Here’s how that compares with other major retailers:

  • Inc.: 29%, August 2014-October 2015, compared with 35%, April 2012 to July 2014.
  • Wal-Mart Stores Inc.: 29%, August 2014-October 2015, compared with 34%, April 2012 to July 2014.
  • Multiline retail category average: 27%, August 2014 to October 2015, compared with 22%,April 2012 to July 2014.

StellaService vice president Kevon Hills says the study included  two years of data, starting  before Target began shipping from stores. While Target’s gains are impressive, especially when compared to the average, Hills says it’s not out of character.

“I’m not surprised only because we’ve seen from other omnichannel retailers the power of ship-from-store,” he says. “You can ship it from closer to your customers’ homes and cut down on the transit time. It’s good seeing that performance is maintained over the past year.”

While Wal-Mart’s delivery times dipped, Hills says he doesn’t view that as cause for concern.

“Wal-Mart has been omni for a very long time,” he says. “They were one of the first companies to roll out ship-from-store. I won’t consider this a step back, I’d look at this as being flat year over year.”

Target executives said in August the company intends to more than triple the stores it uses to fulfill online orders, to 450 from 140 by the end of this fiscal year.

With bricks-and-mortar retailers trying to compete with Amazon’s vast network of fulfillment centers and faster delivery times, Hills says other retailers would be wise to follow Target’s lead.

“You can leverage these massive stores. You can have mini distribution centers where they can pick pack and ship. They can leverage that footprint to deliver the same kind of experience that Amazon has been delivering,” Hills says.

While shipping from stores is all the rage, Hills thinks the next frontier for retailers to level the playing field with Amazon is promoting buy online, pickup in store.  And if retailers are going to be effective, they need to upgrade systems so the process is as transparent as possible for shoppers, he says.

“The first thing is inventory visibility,” he says. “When the shopper goes online and sees the item is available in store and they go to pick it up later, you have to make sure that item is available in store.”

There’s also the issue of training store employees to fulfill e-commerce orders and answer questions about online orders. Shoppers who buy online aren’t necessarily used to dealing with people face to face when completing a transaction.

“What we’ve heard from clients is whenever you introduce the human element to the experience, there’s a lot of variability that can happen,” he says. “Making sure associates can answer questions about e-commerce orders, returns, online experience, all those things come into play.”

Target is No. 16 in the Internet Retailer 2015 Top 500 Guide while Wal-Mart is No. 3 and Amazon is No. 1.




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