What Amazon Might Not Know About On-Line Fulfillment
THE BLOCKBUSTER announcement last week from Amazon.com and Whole Foods Market has analysts and the business media buzzing about a potential new era in online grocery ordering.
Amid the hype, it seems to us at Itasca Retail that an important fundamental point about On-Shelf Availability is being persistently overlooked: What happens when not all the items in a customer’s order are available in their chosen store? Does Amazon have a viable plan to confront this customer service challenge? Does anyone?
At Itasca, we have been looking hard at the consequences of in-store order picking for some time. We had commissioned a Gold Paper on the topic well prior to the recent news. Here are a few excerpts we think will stimulate critical thinking among supermarket executives who are committed to providing a superior shopper experience every time in every channel:
- For supermarkets, fulfilling orders from neighborhood stores with full assortments can be a distinct competitive advantage versus online services that ship mostly packaged products from centralized distribution centers.
- However, order picking in the stores brings adverse consequences on store inventory management, product replenishment, and upstream supply chain management. It doesn’t matter whether the baskets are destined for home delivery or customer pickup. These challenges add to operating costs at a moment when online price transparency is putting greater pressure on margins.
- Most current online ordering technologies build orders from a universal item catalog that assumes identical assortments in all stores and 100% item availability at all times. It’s no wonder that substitutions are the norm in virtually every online order.
- Only a few retailers have the real-time, store-level inventory management and automated ordering tools in place to keep the right products in stock with a high degree of confidence to support sales in the stores – much less their online orders.
- When shelf inventories are optimized, orders received from the online process are far more likely to be filled without adjustment. Improved performance on order fulfillment may be expected to speed the picking process, minimize inaccuracies and largely mitigate the customer experience liability caused when most orders are fixed on the fly.
Store pick-up or store-fulfilled delivery – both processes depend heavily upon consistent, reliable On-Shelf Availability.
Our latest Gold Paper, “Click. Confirm. Collect. Online Grocery Requires Inventory Science to Truly Deliver on Shopper Expectation,” is available now for download.
I invite you to give it a read. Then let’s talk about the opportunity supermarket operators have to use store-level inventory optimization to transform Click & Collect or Deliver into a significant competitive advantage, even versus the Amazon juggernaut.
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