Guest Commentary: Is There a Hotter Topic Than Multi-Channel Fulfillment?
by Tom Rentschler
Whether you call it “multi-channel” or the currently trendy “omni-channel” fulfillment, few topics have generated more interest and analysis in the supply chain industry this year, and with good reason. Retailers are experiencing dramatic revenue growth by adding a direct-to-consumer (DTC) channel, certainly aided by the ubiquity of smartphones. In fact, some analysts are predicting that retail e-commerce sales will grow to $279 billion by 2015.
Lost amidst all of the talk about the explosive growth in e-commerce, however, is the fact that some retailers continue to thrive with a more traditional bricks-and-mortar strategy. FORTE client, rue21, is one such example. Recently named the number nine company in the Forbes magazine list of the Top 50 Best Small Companies (under $1 billion in revenue), rue21 has consistently been one of the fastest-growing retail companies in the U.S. This exceptionally savvy teen apparel retailer now has 843 stores, mostly located in rural areas or smaller cities with fewer large competitors. rue21’s constantly changing assortment of apparel and accessories is influenced by a panel of teen advisors that regularly provides feedback on new products and fashion trends. And their stores, outfitted with themed dressing rooms and a selection of popular music, provide a truly differentiated customer experience.
Another prominent retailer experiencing solid results from a “bricks over clicks” strategy is Pier 1 Imports. In an article in the November 5, 2012, issue of Forbes, CEO Alex Smith detailed his strategy for continuing to grow this long-time retailer of home furnishings: While the retail universe fixates on phones and screens, Smith plans to pump a hefty $100 million into improving his 1,000 stores through remodels, relocations and better merchandising fixtures over the next three years. According to Smith, “We are trying as much as we are able online to replicate the in-store experience,” even though he expects online sales to amount to only 10 percent of total revenues by 2016. According to the same article, Williams-Sonoma, parent of rival Pottery Barn, now credits nearly 40 percent of its $3.7 billion revenue to e-commerce. Pottery Barn, it seems, is closer to the norm these days, suggesting that retailers should not under-estimate the potential for growth that the DTC channel might fuel.
Embracing the DTC channel has enormous implications to the distribution operation, placing an entirely different set of demands on distribution centers originally designed for retail store replenishment. The challenges inherent in picking, packing and shipping a single item to an individual consumer can quickly over-run the capacity of even the most efficient and productive facility. When FORTE client Vera Bradley, the rapidly growing maker of fashionable and colorful handbags, accessories, luggage, and paper and gift items, added e-commerce, its DTC sales grew at such a rapid pace that the distribution center struggled to keep pace.
Fortunately, we had worked closely with the company to develop a flexible, scalable plan to master the new capabilities required to perform multi-channel distribution in a single facility. The facility expansion recently completed for Vera Bradley, makes room for additional reserve storage, automated picking and additional shipping capacity. An innovative new put-to-light order sort/pack area for e-commerce will greatly improve packing capacity, efficiency and productivity. Additional shipping sort lanes for fluid loading and pack and hold, a secondary sorter for LTL shipments with surrounding pallet build area and a separate e-commerce shipping sorter are also part of the expansion. A new mezzanine structure over the e-commerce expansion is the new home for the value-added service processing area with intelligent conveyance for cases and totes utilizing FORTE’s Smart Warehouse Suite warehouse control system software.
Consumers, of course, have high expectations for receiving their order in a timely (trending toward same-day) and accurate fashion from an e-commerce fulfillment operation. They certainly expect the e-commerce experience to rival or even surpass the bricks-and-mortar one. The companies who make the investments in getting multi-channel fulfillment right will certainly reap rewards in the form of tremendous growth and customer loyalty, as we continue to see with stellar operations like Vera Bradley’s. But don’t discount the successful retailers like rue21 who continue to invest in a highly differentiated in-store customer experience.
Tom Rentschler is VP, Sales and Marketing with MHI Member FORTE
