E-commerce fulfillment squeezes retailers’ profit margins, Manhattan Associates says

As retailers seek a roadmap to post-pandemic growth, they will need to balance the twin goals of fulfillment margins and frictionless customer experiences, according to supply chain software vendor Manhattan Associates Inc.

The dramatic increase in e-commerce volume triggered by the pandemic has strained many retailers' abilities to preserve their profit margins while providing new forms of order fulfillment, such as buy online pickup in-store (BOPIS), ship-from-store, and curbside pickup, according to a report from the industry analyst firm Incisiv that was commissioned by Manhattan Associates. 

News that the pandemic triggered a five-fold increase in e-commerce volume in 2020 compared to the same period in 2019 may have seemed like a bonanza for retailers, but many companies struggled to grow their profit margins through order fulfillment, according to the report titled "The New Store Experience Imperatives in High-Touch Retail.” 

"The e-commerce uptick of the last twelve months has necessitated a realignment of how retailers approach leveraging store associates, locations, and inventory," Kevin Swanwick, vice president for store solutions at Manhattan Associates, said in a release. "Associates became pickers and shippers; stores turned into mini fulfillment centers, and in-store inventory was increasingly made available online."

To cope with that new reality, the report found that retailers should follow four steps to ease their brick and mortar transformations:

• make store-based fulfillment more profitable by addressing the inefficiencies in the process,
• unify the customer experience across both physical and digital touchpoints through strategies like equipping store associates with digital tools for email, text, or social media,
• ensure the shopping experience is frictionless, including easy returns, and
• keep in-store inventory management just as accurate as warehouse counts to enable better results with BOPIS and curbside pickup.

The research was generated by a survey of 2,500 in-store shoppers (specifically in the high-touch retail segment including fashion, luxury, and specialty) that was compared to a separate survey of 125 U.S. high-touch retailers to contrast sellers’ capabilities with shoppers’ expectations.