This is an excerpt from Thursday’s (6/10) Point of Sale retail supply chain newsletter sponsored by ArcBest.
Consumer expectations are always changing, and whether it’s the shopper or the brand that leads the way depends on what is expected to change. With sustainability and smaller environmental footprint, it is the consumers, particularly the younger generations of consumers, who are responsible for driving change. But in the case of delivery speed, it’s been the company that is constantly ratcheting up the status quo.
For the rapid evolution of BOPIS and curbside pickup services, it was the pandemic that drove implementation and innovation. As Americans stayed away from one another, the curbside infrastructure Target, Best Buy and Dick’s had been building for years propelled them to market share gains, despite store closures and diminished foot traffic. Others quickly rigged up curbside operations in whatever way they could just to keep up with those that had invested prior to the pandemic. Those stores are now catching up by building more robust curbside infrastructure, acquiring the right technology to operate it and hiring and scheduling properly to service the increased throughput.
This is the new normal. Omnichannel is far from a new idea, but its implementation has been pulled forward by years since COVID began. Soon every retailer with an online presence will offer BOPIS/curbside pickup. Why? Because it’s good business. It’s smart supply chain strategy. Online brands are working to position product closer to consumers, while retailers already have it where they want it. The cost savings of leveraging stores as distribution points can be enormous. Target has said it saves 40% on transportation when shipping from store versus from a fulfillment center, and the number is even higher for curbside, where no additional shipping costs are incurred.
With curbside and BOPIS services a certainty moving forward, what is the emerging consensus on optimal curbside fulfillment speed, and how can retailers make it happen? Amazon set the status quo for online delivery at two days (for the time being), and most retailers and brands, including Shopify’s fulfillment network, Walmart’s third-party marketplace and others have been built to match Amazon.
In the first quarter of 2021, over 90% of curbside orders at Dick’s Sporting Goods were ready within 15 minutes, according to the company. Upon arriving at the pickup location, half were delivered to the customer’s car within 2.5 minutes. That is wicked fast and highly impressive. However, the average items per order at Dick’s is lower than at basically every other retailer. Workers may have to visit two or three departments for a couple of items, whereas Target and Walmart pickers are fulfilling 20-plus SKU grocery and essentials orders. And Dick’s stores are typically in off-mall locations, where parking and curbside space should be available. So naturally, Dick’s probably should have the fastest BOPIS speed in retail. But what should everyone else strive for?
Dick’s website indicates curbside/BOPIS pickup is typically ready within one hour of order placement. Best Buy, which has invested heavily in omnichannel initiatives in the recent past, also promotes a one-hour window alongside Apple, Kohl’s, Nordstrom and Staples. Gap and Macy’s promise two-hour fulfillment for pickup orders.
For Prime members, Whole Foods offers pickup in as little as an hour. Walmart’s pickup orders are available within four hours, and Target (the BOPIS queen) says select stores may take up to six hours. Walgreens, with its smaller store formats, promises orders will be ready “in as little as 30 minutes.”
Home Depot’s in-store pickup page wisely states: “Most orders are ready within a few hours, however, please allow for extra processing time on items requiring assembly or large orders. Due to current events and high volume, orders may be delayed.”
What should the standard be? The competitive landscape shapes consumers’ expectations for service levels. With some retailers promising one-hour processing of BOPIS/curbside pickup, should that be the goal? Dick’s BOPIS metrics are remarkable, but different retailers need different windows based on the complexity of their stores, the labor force efficiency, average order size and internal logistics.
The standard for BOPIS will be different for each company, and the best comparisons will come when judged versus its own retail segment. That said, each company should strive to be as fast as they accurately can be. Accuracy must be the No. 1 priority and retailers cannot allow speed to deter it. The aggravation from one poor BOPIS experience can be a relationship killer.
Speed is also of great importance and retailers must strive for continuous improvement. Store pickups of any kind – whether inside or at the curb – are one of the most effective weapons retailers have against Amazon. As such, retailers ought to exploit this opportunity, even if it means hurting margins in the short term to account for increased staff and infrastructure build-outs.
Offering speed enables retailers to build scale and density, but only if expectations are appropriately set and delivered on as promised. Retailers must stay within their logistical bandwidths because setting an unrealistic bar and failing is worse than having a longer wait time. At the same time, retailers must continuously invest and innovate to expand their logistical bandwidth if they want to keep up with the likes of Amazon, Best Buy, Dick’s, Walmart, Target – the best of the best.
What changes need to be made? To compete with Dick’s, it takes a complete mindset shift away from traditional demand planning to data-driven continuous planning. This takes real investment and can take a long time to implement, iterate and innovate. Retailers must have an accurate view of real-time inventory and automated standard operating procedures for inventory exception management. For example, when Dick’s sells more or less than it typically does of a certain product in a given week, it has automated steps in place to adjust its orders from suppliers, its shipments from DCs and its transportation needs from providers.
Retailers must also have backroom locator systems to enable for rapid picking and packing of items – employees must know exactly where the inventory is. There also must be wireless and instantaneous communication among employees to allow multiple people to pick and pack a single order simultaneously. Finally, retailers must figure out where the best place to execute each step of the process from picking and packing to holding and car delivery. This can be particularly challenging at grocery stores where refrigeration needs must be accounted for.
The correct systems in place can help achieve the accuracy, but then it’s about maintaining the accurate on-hand inventory, adequately staffing and working closely with transportation partners to ensure on-time delivery. Leveraging stores to fulfill a higher percentage of total sales means more inventory to stores and it means more inventory in more places. BOPIS, curbside and ship-from-store operations mean adding many more endpoints in the supply chain. “When the endpoints are being dispersed like that, it naturally creates smaller shipment quantities,” Dennis Anderson, chief customer officer at ArcBest, told me. It also means more frequent replenishment runs as stores are being used to fulfill much more than foot traffic sales. Except for the largest big box retailers, replenishment runs won’t usually be full truckloads, but rather LTL as retailers must keep more SKUs in more places.
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