Can Shipping-From-Store Save Brick And Mortars From E-commerce Giants?
Just a few days ago, Walmart and Google announced that they’re partnering up to offer Walmart’s products on Google Express, the tech giant’s online shopping space. As you might have noticed, the timing of this partnership coincides with Amazon’s move to acquire Whole Foods Market earlier this year.
If you’ve been eyeing the encroaching advances of e-commerce titans into brick and mortar retail with growing concern, then you’re not alone.
Since the advent of e-commerce and particularly so in recent years, traffic to brick and mortar spaces has seen a steady decline. According to OC&C Strategy Consultants, UK’s home delivery and click&collect market is set to double over the next decade. By 2025, they estimate that home deliveries will take 30% of all retail sales, and the in-store retail market will lose 40% (or ~£92 billion) of its revenues to online channels.
The Google x Walmart partnership is a testament to the growing threat of e-commerce to traditional retail. Because pure play in-store retail alone just isn’t enough to compete anymore.
Indeed, sprawling digital marketplaces like Amazon offer a variety of products, pricing and range of home delivery options that’s hard to compete with.
But e-commerce alone isn’t enough, either.
Even with all the competitive advantages of e-commerce, Amazon nevertheless made a $13.7 billion decision with the Whole Foods Market acquisition to establish a brick and mortar presence. Why?
The Last-Mile Puzzle
The reason why an e-commerce giant like Amazon is investing in prime real estate in high cost locations has to do with the obstacles of last-mile fulfilment.
In the days of purely in-store commerce, a customer would go into your store, buy the goods they want and take them back home themselves.
With e-commerce only merchants, customers browse through a website, order their goods and have them delivered. Instead of keeping their stocks in a high street shop front, e-tailers store their products in warehouses out of town, and fulfil demand through deliveries.
‘Last-mile’ refers to the final legs of the distribution journey — the stretch of logistics from your warehouse to your customer’s doors.
Because e-tailers have to distribute from locations far from the city, it places certain constraints on the speed and flexibility of the deliveries options that they can offer. Meaning rigid time slots and natural limits to delivery times.
You might be thinking that waiting a day or two for your goods to arrive isn’t all that bad. But the reality is that consumer trends are shifting quickly to a culture of convenience, where they not only expect but demand a range of rapid and flexible delivery options from retailers.
The challenge of the last-mile, then, is a logistics problem in meeting consumer expectations for on-demand fulfilment and instant gratification.
The solution to the last-mile challenge is called ship-from-store.
What is ship-from-store? Brick and mortar’s answer to e-commerce titans
The ship-from-store model is a simple retail strategy with compelling results. As the name suggests, it’s a way for brick and mortar merchants to repurpose existing real estate as both a storefront for walk-in customers and a distribution centre for online fulfilment.
By putting their catalogues online and delivering on-demand, brick and mortars can open up a whole new revenue stream and expand their sphere of influenceto customers that they wouldn’t have been able to reach before.
With just physical storefronts, customer reach is limited to a small radius.
Instead of trucking goods to out-of-town warehouses then delivering them back into town — retailers with existing locations in the city are already within the reach of 90% of the urban population; being closer to your customers means you can deliver faster and at lower transportation costs.
Adding on-demand delivery capabilities can expand your sphere of influence to cover the city!
Brick and mortars retailers already have what Amazon is trying to attain: physical real estate in central locations.
Of course, whether it’s to get your products to your customers, or just to move stock between stores — for ship-to-store to effective, you need a delivery operation that can support the logistics of the strategy.
For the majority of SMEs, however, the operational and technical complexities, and the financial requirements of a delivery fleet is simply infeasible: being able to make sales through walk-in customers as well as online patrons is a great idea, but entirely irrelevant if it means you have to first invest astronomical amounts to get it all set up.
Going back to the Walmart x Google partnership, the companies said that the move was less about how online shopping is done today, but about where it is going in the future. So the choice is simple — join the future and incorporate on-demand logistics to start competing in e-commerce, or be left behind.