Why some retailers suspend online order fulfillment from stores
December 4, 2015 01:17 PM
Shoppers waited outside Target stores for doors to open at 6 p.m. on Thanksgiving. Inside, employees picked shelves to fulfill online orders, working two to four hours before doors opened.
Target Corp. deployed workers in about one-quarter of its 1,800 stores to pick online orders for shoppers who went to Target.com on Thursday to take advantage of the retailer’s Black Friday specials, which Target offered online all day Thanksgiving Day and then in stores when they opened in the evening. Though Target, No. 16 in the Internet Retailer 2015 Top 500 Guide, planned to hire 70,000 seasonal workers during the holiday shopping season, it used full-time store employees to fulfill e-commerce orders.
But the retailer says it made sure not to strip store shelves bare as it fulfilled the web orders. “We have systems designed to protect and preserve store inventories,” a Target spokesman says. “When an item’s inventory gets down to a certain point, we make that item no longer available for online orders.”
Some Target competitors, however, stopped fulfilling online orders from stores on Thanksgiving Day because of the high in-store traffic.
Best Buy Co. Inc. and Wal-Mart Stores Inc., for example, stopped picking inventory from store shelves a day in advance of Black Friday’s sales, according to sources. Retailers don’t want to run short on goods that shoppers have waited for, often for hours in line, and the stores are just too big of a circus, as one source put it, to make it work.
The practice started because retailers wanted to reduce the need for warehouse space and deploy store employees during non-peak hours.
Forrester researcher Brendan Witcher says retailers are getting smarter about how to adjust to evolving holiday shopping patterns. They’re keeping stores adequately stocked by creating higher levels of backup stock to service cross-channel orders. They also are removing some popular items from the buy online, pickup in store option to keep products in stock for in-store consumers , he says.
Technology is making it possible for retailers to shift quickly from in-store product picking to warehouse picking, based on inventory flow.
FitForCommerce senior consultant Laura Swanson says it all comes down to inventory management. “For days like Black Friday, retailers can disable the online option for buy online, pick up in store,” she says. ”They can also choose not to allow buy online, fulfill from store. Retailers can set inventory thresholds for high-volume days—meaning once a particular product hits X units, do not fulfill from store anymore. A retailer’s inventory management system should be robust enough to even set this at the department, class, brand or style level.”
Macy’s Inc. (No. 7 in Top 500) started fulfilling online orders from store stock at the same time—6 p.m. on Thanksgiving—it opened stores for Black Friday deals, a Macy’s spokesman says. Macy’s has fulfilled some online orders from all of its stores since fall 2012.
“We have a pretty sophisticated system that runs on algorithms that calculate the best place (from which to fulfill or ship the item),” the Macy’s spokesman says. “In part, that algorithm takes into account where we are most overstocked and thus able to avoid a future markdown by shipping from that particular location. If a store is unable to fulfill an item, a press of a button sends the order to the next location in the pecking order. This is a system we built ourselves in-house, so it is tailored to how our company runs.”
Target has no plans to start online order picking several hours ahead of Christmas Eve or any other day for the rest of the holiday season because most stores are open until 9 p.m. or 11 p.m. nationwide, and no future promotions compare to the Black Friday specials, the spokesman says.
Standard operating procedure outside of the holidays works like this: Consumers who order online and request in-store pickup—15% of Target.com’s order volume—trigger alerts to the affected stores, where workers pull the items, the spokesman says. For online orders to be shipped to the customer, workers pull the products and put them in a back room, where other employees pack them for UPS daily pickup.
Target CEO Brian Cornell told analysts in mid-November that Target planned to triple the number of stores used to fulfill online orders, adding more than 300 stores to the program during the third quarter. “This will enable about 40% of digital transactions to be shipped from our stores in the fourth quarter,” he said. Target also opened two direct-to-customer fulfillment centers in Q3 in advance of the holiday season. Based on the reach of UPS’ distribution centers, Target’s current use of 460 stores covers the entire country.
But in-store inventory and new fulfillment centers couldn’t keep Target.com available to consumers. The website cracked under the pressure of heavy Cyber Monday traffic. The retailer diverted some customer traffic Monday to prevent overload, allowing the diverted shoppers onto the site once it could handle the load.