How Retailers Can Compete With Amazon At Its Own Supply Chain Game

Read the latest article by Retail Touchpoints, featuring Andrea Morgan-Vandome, CMO of Celect, to learn how retailers are taking a page from Amazon's own playbook and using their store network as one unified distribution center to achieve massive margin gains. 

Retail TouchPoints —  July 23, 2019 — While few things remain constant in retail, the customer always comes first. And in today’s Amazon Prime world, customers demand faster, cheaper and more convenient fulfillment options than ever before. Retailers are scrambling to keep pace, offering everything from pre-selected delivery slots and buy online, pick up-in-store (BOPIS) to two-hour delivery windows in an effort to provide the seamless, channel-less experience customers expect.

Yet retailers are struggling to accurately determine what, when, where and how much customers will buy. To beat this real-time “last mile” supply chain challenge and successfully compete with Amazon, retailers must take a page from the retail giant’s own playbook and leverage their stores as one unified distribution center to achieve massive margin gains. 

The Evolution Of Fulfillment And The New Ship-From-Store Model

Historically, online order fulfillment has been accomplished through either large fulfillment centers or store-based fulfillment via stiff, rules-based order management systems, where inventory was either pulled from the store closest to the customer or a store with the lowest shipping costs.
 
While this approach works in theory, the reality is that the retailer often suffers as costs escalate. Either additional inventory is stockpiled or stores must manage resulting inventory dilemmas. For example, stores with high inventory turnover become under stocked and cannot cover walk-in demand, while stores with slower inventory turnover become overstocked and vulnerable to unplanned markdowns. Last year alone, U.S. non-grocery retailers lost $300 billion in revenues due to markdowns — which were primarily driven by inventory misjudgments. 
 

With the success of Amazon and the need for faster, more cost-effective order fulfillment, many traditional retailers have turned to “ship-from-store” methods using store inventory to fulfill online orders. The majority of these companies are adopting a combination approach leveraging distribution centers (DC) and stores. While this approach enables more flexible delivery capabilities and considers cost, it has also introduced two new challenges:

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