A struggling retail market poses a stiff threat to the brick-and-mortar store, but salvation could come from omnichannel practices such as "buy online, pick up in store" (BOPIS) and "buy online, return in store" (BORIS), industry experts say. Tying e-commerce fulfillment to the physical storefront could breathe new life into retailers' physical outlets, which are ripe for change in an era when convenience rules the shopping experience.
For evidence, look no further than BOPIS trends. A recent survey by supply chain software developer JDA Software Inc. revealed a steady 44 percent increase in BOPIS adoption since 2015, highlighting the changing role of the physical store. "While there has been speculation of a 'retail apocalypse,' that doesn't seem to hold true for consumers," said Jim Prewitt, vice president of retail industry strategy at JDA, in a statement accompanying the release of the company's "2017 Consumer Survey." "No longer the only channel for shopping, brick-and-mortar stores are still a key cornerstone for a quick and easy shopping experience and the facilitator for popular fulfillment options, like buy online, pick up in store and buy online, return in store."
Such trends present challenges and opportunities for retailers as they continue to hone their omnichannel strategies. Challenges include aligning warehousing and logistics functions with customer service needs, an issue that requires a sharp focus on improving back-of-store operations. Opportunities include maximizing add-on sales at the point of pickup or return, an issue stores can address by providing incentives to use BOPIS and BORIS services.
In either case, experts say the brick-and-mortar store is anything but on its way out. "Not everything is done online, although it gets most of the attention," says Scott Deutsch, North American president for E+P, a global provider of supply chain software solutions for logistics management. "We sometimes forget that less than 10 percent of transactions today are online. Even though retail stores may be struggling, the reality is that 90 percent [of transactions] still occur with the customer walking into the store."
MAKING THE MOST OF THE STORERecent announcements from large retailers and online giants underscore Deutsch's point. Consider this year's purchase of Whole Foods Market by Amazon.com Inc. and, more recently, Nordstrom Inc.'s plans to launch Nordstrom Local, a network of small service-focused outlets that will carry no inventory but offer a wide array of services, including BOPIS and BORIS. Nordstrom leaders emphasized the importance of service, speed, and convenience—as well as the need to find new ways to engage customers—in announcing the launch earlier this fall.
Of course, creating that convenient customer experience requires a smooth-running supply chain, and for many companies, that will mean finding ways to bridge the gap between retail store operations and warehousing and distribution functions. Consider it this way: BOPIS services won't get a company very far if the customer's order isn't available when he or she arrives to pick it up because a store associate is searching the aisles or digging through a disorganized stockroom to find it.
"Omnichannel is forcing people to deal with back-of-store operations," says Deutsch, pointing to inventory control as a cornerstone of a successful omnichannel approach. Essentially, the store must become a logistics center, he adds.
Andrea Nottestad, market manager for retail supply chain at reusable packaging provider Orbis, agrees, pointing to the growing complexity of moving goods through the supply chain in an omnichannel environment. "Instead of moving linearly—from the DC to the store, for example—you now have goods moving out of the DC to the retail environment, to another retail environment, and so forth," explains Nottestad. "Especially when competing in next-day delivery, you see a lot more movement of material in the network, and this increases the need for visibility [throughout the supply channel]."
As a result, upgrading IT (information technology) systems, adjusting business processes, and redefining customer service requirements are becoming important aspects of the strategic planning process for retail organizations. As Deutsch explains, consumers couldn't care less where a product is being fulfilled. They are more concerned about delivery options and getting what they want when they want it—placing warehousing, distribution, and logistics functions front and center. "[Retailers] need to think in terms of the inventory in the store as being, effectively, a warehouse location," Deutsch adds.
CONVENIENCE IS KEYThe convenience associated with dropping into your local store could also mean big business for those ready to capitalize on it. For one thing, in-store returns alleviate the hassle of paying for return postage and packaging—still the leading frustration for online shoppers, according to the JDA survey, which also revealed that nearly one in three shoppers have used BORIS services this year, up from just 20 percent in 2016.
BORIS services also increase foot traffic in stores, which can lead to higher sales. BOPIS services have a similar effect and have become even more popular in the last year. Half of respondents to the JDA survey, which was conducted across more than 1,000 U.S. consumers earlier this year, said they used BOPIS services in the last 12 months—a more than 40-percent increase since the company's 2015 survey—and even more said they would take advantage of it if retailers offered incentives to do so. In addition to adding value to the customer experience, such services can help retailers differentiate themselves in the marketplace.
"While some retailers are already testing out ways to incentivize consumers to choose BOPIS services over home delivery, our research found that this could be a successful way to capture shopper attention in today's competitive marketplace and further validate the role that BOPIS will play in the success of retail stores," JDA's Prewitt said in the statement, adding that incentives such as discounting will drive customers to the store, where they may buy more than they intended to, boosting store sales.
All of this underscores the importance of a seamless customer experience. Reinventing the physical store to take advantage of omnichannel trends is one step in that direction—but it's a big step for many organizations.
As Nottestad explains, the speed at which all of this is happening may just be the greatest challenge of all. "A good handful of retailers have seen omnichannel or e-commerce as a part of their strategy for some time now," she says. "But there are other retailers just beginning to respond to it, and the speed at which it is imposing change on their organization is a big challenge."
Read the other part of our special report on omnichannel distribution, "Study: Reverse logistics is still a puzzle for omnichannel retailers."
Gartner, Inc.
