Daily Dose of iQ: Wal-Mart Building Distribution Centers for Faster E-Commerce Fulfillment

May 08, 2015 — Joan Gurney

This is the week of news related to stores as online fulfillment centers for online orders. Yesterday, we blogged about Best Buy Canada's new "Marketplace" program, inviting third-party online vendors to deliver stock and accept returns at its physical stores. Tuesday, we blogged about Macy's and Nordstrom using their stores as online delivery endpoints too.

Today, we saw a Wall Street Journal article about Wal-Mart's own supply chain improvements. "(Today), an order of different products—say, shampoo, a toy and an Apple Inc. iPad—may have to be filled from three separate locations," wrote the WSJ's Kim Nash.

Wal-Mart's goal: Fulfill online orders from a single warehouse. Until now, three different products may have come for three separate locations.

"The goal of Wal-Mart’s new (fulfillment) centers is to provide a single place stocked with a wide variety of products to get shipments collected and sent faster, a Wal-Mart spokesman said. Ultimately, analytics behind the shopping software will determine, on the fly, the most efficient way to fulfill the order, the spokesman said. The company declined to make a business executive available for an interview.”

Wal-Mart's warehouse/fulfillment center concept makes a lot of sense. When all the products required to fulfill an order are in the same place, it’s much faster to pick, pack and ship those items to the customer than it is to check around at multiple locations to find stock. Granted, the order management software, algorithms and analytics should reduce the human effort required, but from a customer’s perspective it’s also nice to have all the products ordered arrive at a similar time or even in the same box. The customer is not thinking about the retailer’s stock levels or which location the product is coming from -- they just want their desired items in a timely fashion. 

The customer is not thinking about where the product is coming from -- they just want it in a timely fashion.

In a greater sense, stores like Wal-Mart (and in our previous blog posts, Best Buy, Macy’s and Nordstrom) are playing to their advantage over Amazon: They already have a network of stores to which they can drive online buyers to pick up their purchases… and hopefully convert some in-store impulse buys from them when they visit the stores for pickup.

In-store pickup provides the customer with more flexibility as to when and where they want to get their purchased items. Bringing them into the store also opens opportunities for add-on purchases. I’ve ordered gifts online before and when I go to pick them up, I usually end up buying a card or some wrapping paper while I’m at the store as well… and maybe some tape… and new pens… and a bag of chips because I’m picking this stuff up on my lunch break and I could use a snack. You get the picture.

I'm rarely home during the day. I almost always choose the ship-to-store option.

Another advantage to in-store over home delivery is convenience. If the retail location in question is near my workplace, I almost always choose the ship-to-store option.

I’m rarely home during the day and there is always added stress that I’m going to miss the delivery and have to pick it up at a post office somewhere (which generally is not open during the hours I'm available to pick it up). It also gives me a chance to check the product out and make sure it’s exactly what I ordered. If there are any problems, I’m already at the store and can arrange for a return or exchange right away.

Topics: Retail Operations, Mobile Industry, e-Commerce

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