Bringing the store experience to fulfillment…close…but still long way to go.

I finally broke down and recently decided to upgrade for my iPhone. Side note, a few years ago, when the newest generation of iPhone was available it was treated like Christmas morning by some of us Apple fans. Some of us would literally wait online until the magic hour when you could pre-order the new version. Today, it is a non event. I will upgrade when I get to it, type event. For me, I finally broke down and upgraded after seeing the new phone at the Apple store, demonstrates the importance of a brick and mortar presence! Granted that pushed me to action, but I wasn’t as excited about it as in the past. But this post isn’t about the changes in behavior with getting a new iPhone. What this latest saga of upgrading my phone has provided an example of trying to bring greater experience to the fulfillment process. And how much we still have to learn.

Dreaming of the pacific…

Let’s set up the situation. My carrier is AT&T, I went through their portal to upgrade my phone. I went through the configuration – I went with the Pacific Blue option with 256 GB of memory. I selected my payment plan and then was told item could be delivered later in the week. Perfect. At least I thought. What happened next is a good effort by AT&T…but falls a little short. I was told that a customer representative would show up between 2-4 on Thursday, and spend 30 minutes with me. Hmmmm. Their tag line “we are bringing the store to you.” Makes perfect sense. I have been preaching the importance of making fulfillment a key part of the experience. Looking to replicate the in store experience at the last mile is a great example of this. However when it comes to the execution there remains much to be desired. While I appreciated the service, all I wanted was for the phone to be delivered to my address. I did not need to have a 30 minute tutorial on how to switch my phone. I realize I am not a millennial or a Gen Zer, but I can still switch my phone on my own, thank you very much. Additionally, I was told I would have to show ID and credit card…really? Are they delivering the Excelsior diamond to me? Finally they showed up, I was in the middle of all day meetings, couldn’t reach me and didn’t deliver the phone (mind you there is a perfectly safe location where packages are delivered every day). This started a cacophony of emails and messages from AT&T and their delivery service to try and reschedule the delivery. I also called AT&T customer service (the chatbot wasn’t working). Through all this communications gymnastics, I still don’t know when the phone will be delivered.

So what are some lessons from this awkward dance I am having with AT&T?

• Figure out how to bring added value to fulfillment: Clearly AT&T is trying to add value to the last mile fulfillment. But it is not one size fits all experience – some customers might want to be walked through the process of switching phones, others, like me, do not require this service. Make it an option. What about other value added services such as taking an old phone and recycling it? Could AT&T even offer to take back other small electronics for recycling or refurbishing? Headphones, chargers, tablets or even laptops that have accumulated in our homes. I appreciate the effort to add value added services to the delivery, but you must make sure that each customer truly desires and sees value in what you are offering. It cannot be a one size fits all.
• Communication is crucial: Like with many things in life, being able to communicate clearly is paramount. I appreciate AT&T and their efforts to communicate, however it has been disjointed and confusing. Between text messages from the delivery service, emails from AT&T, emails from the third party and a telegraph from Alexander Graham Bell, it has been clear as mud with regards to what next steps are. Even on the web site there is no clarity as to when delivery will be made. Have one central location to communicate – a centralized web location – so customers have a visual source of the truth. Any email or text message can always refer back to the location. If Fedex and UPS can do this, why can’t AT&T?
• Provide customers options…at the point of commerce: I realize that the goal is to simplify and reduce friction at the point of sale, so suggesting you ask for more decisions to be made might be counter intuitive. However, when it comes to decisions on delivery times and value added services at delivery, these are crucial variables that consumers will see value in. More importantly they impact the overall experience and need to be properly offered and accepted by the retailer before the “buy” button is pressed. I had no idea that I was getting a 30 minute session with delivery. I also did not realize having this service impacted delivery times. These need to be clearly explained and offered before the purchase is made. I am all for providing value added services tied to fulfillment, but you need to make sure your customer is aware of the offering, understands the value and is allowed to make a choice as to whether or not to leverage these options.

So I will see when this Pacific Blue iPhone arrives. Maybe 5 years ago I would have been more worked up about the delay and not having my new toy….errrrr…device as soon as possible. Today I just focus on the break down in the delivery and the effort by AT&T to make this a more valued experience. A for effort, no grade yet for execution.

Micro-fulfillment! Get your micro-fulfillment here!!

If you are supply chain nerd like myself, or are in the grocery or general retail space, micro-fulfillment has been the all the rage for the past few months. The end of 2020 saw an interesting upswing when it came to discussion of this trend. Not surprisingly, this coincided with the Covid 19 fueled e-commerce boom of last year. So what is this new buzz word? Basically this is all about getting inventory closer to the consumer, in smaller footprint distribution nodes to be able to fulfill our orders at a faster and more efficient pace. But you might ask yourself, “wait, isn’t Amazon already doing 2 day, same day or 2 hour fulfillment?” Yes. However, don’t dig into the amount of money it is costing them to do this. Micro-fulfillment is giving retailers, direct to consumer and other companies a path to meeting these ever shrinking windows of fulfillment that consumers believe they need. So what is really happening?

Micro-fulfillment, is the natural continuation of what we have been seeing in the supply chain space for years now. We have moved from a traditional linear model of moving product: source it, make it, ship it, store it, sell it, to a more complex networked approach. We can drop ship items from the factory floor direct to consumer, we do distribution center (DC) by passing, we ship directly from DC to consumer, we have an increased number of nodes where consumers can access their inventory (lockers, 3rd party locations even the trunk of your car). What this has done for supply chains is exploded the number of nodes we need to service with regards to “last mile” fulfillment. Emerging from this is revisiting of our overall warehouse strategy. Do we need millions of square feet of warehousing space…yes…but we also need more flexible space. This is where micro-fulfillment comes in. When we look at micro-fulfillment we need to consider the following:

• How time sensitive is my product for delivery? If you are fulfilling a perishable product, think groceries, then time is of the essence. Getting someone their Ben & Jerry’s ice cream and fresh shrimp is time sensitive. Having that inventory closer to the consumer means you have a greater chance to meet those requirements than if you are fulfilling from a large DC that is not in a central location.
• Is there critical mass in the areas I want to put a micro-fulfillment center? No surprise that Amazon’s first foray into micro-fulfillment took place in Manhattan. There is a natural density of customers, within a tight radius to warrant investing in such a center. This is why most of these models are being looked at in more densely populated urban settings.
• What other resources can I leverage? Going down the path of micro-fulfillment does not mean building or renting more physical space. Do you have the existing physical stores that could serve the micro-fulfillment needs? Many grocers are looking to leverage their existing stores to pack orders that will be sent out for fulfillment – basically using their existing real estate for both in store and micro-fulfillment needs.
• Do I have the right technology in place to properly manage these nodes? I have said this many times, so I apologize for sounding like a broken record, technology is a tool not a panacea! But you absolutely need the right tools to properly manage micro-fulfillment. You will need rich data on your product, demand, density of demand and fulfillment orchestration. Not an easy task. To properly manage these companies will need to have a holistic view of inventory and demand, but be able to drill down to the local level when it comes to fulfillment.
• How flexible can your network be? In the future, micro-fulfillment sites will also offer the “pop up” site capability. All one has to do is look around to idle mall space the month leading up to Halloween. You find a number of pop up Halloween themed stores. The same will come to fulfillment. Our micro-fulfillment nodes will have to be flexible, as demand and delivery patterns change, so might the locations of these centers. Is your node capable of being moved to different locations based on demand patterns?

I am sure we will keep hearing about these micro-fulfillment centers. At least once all the buzz around Gamestop dies down. We should not view this as a radical new idea when it comes to fulfillment but really a continuation of the drive to make fulfillment more in line with the demands consumers are placing on our networks. Each supply chain must determine what their overall fulfillment strategy will look like, how it will evolve and what other capabilities are required. It will certainly not be one size fits all. Rather a collection of strategies that best fit your product, customer and time frames required.

Amazon fulfillment center coming to a mall near you. Not as bad as you think.

There has been some recent reporting that Amazon is in talks with mall management companies to take over some of the space from anchor tenants. Click here for a recent piece in the WSJ. Legacy tenants such as Sears and JCPenney. Legacy names that have fallen on hard times and faded away from the mainstream retail conversation. Many are fretting that this would be a terrible move for malls, letting the very player that has put these malls under duress come right into their house! Set up a fulfillment center, and just crush whatever life there is left for these malls. Not so fast!

I’m not convinced. First, what choice do malls have? The days of having mega retailers act as the anchor tenant have gone. The internet made sure of that. The advent of the World Wide Web meant that the mega shopping malls, were just a click away. I remember working at Forrester in the late 1990s, I had a large mall owner as a client. We had a conversation that went something like this:

Mall owner: “We are really excited about the web. We want to create a portal, where the brands and retailers that are in our mall could be part of our portal. Customers can then access our site and get to their pages.”

Response: “The internet is that portal. Why would you need to go through a secondary portal when I can get to those brands and retailers directly?”

Needless to say the silence after that conversation was deafening. This was retail thinking driven by a brick and mortar only mentality.

So fast forward 20+ years. Malls are taking it on the chin. They are scrambling to figure out how to get foot traffic into their physical locations. Many have turned to more experiential type tenants – restaurants, salons, gyms, medical offices or amusement park style operators (visit the Mall of America in Minnesota for a true experience). Some have looked to add residential inventory as well – or built around a larger attraction such as a sports venue. The Atlanta Braves’ new baseball park, Truist Park, is built with an outdoor mall and residential space – the Battery.

But many malls are still stuck with massive anchor footprints, a reminder of the Jurassic time in retail. Some are looking to bring grocers into those spaces. A local mall in the Boston region added a Wegmans a few years ago, hoping to attract foot traffic. And now, some mall owners are considering bringing in their biggest nemesis of all – Amazon – into that space. Here is why that might not be as bad as some believe:

• Create some buzz – want to bring your property some buzz? Let Amazon put up a distribution center. The local media will certainly pick up on it. There will be news reports on the automation that Amazon will be using to fulfill orders, clips of the boxes zipping around the conveyors and on Kiva Robots. There will be talk of how many employees the fulfillment center will now employ.
• Amazon employed foot traffic – maybe a small victory, but any mall should be happy to have bump in terms of having “guaranteed” foot traffic as Amazon employees will be present through out the day. There is the potential for these employees to become patrons of the other services within the mall. Maybe that is fool’s gold. But at least there is some opportunity to have a pseudo captured audience.
• Incentivize Amazon to do more than simply deliver – Malls who look to Amazon to take some fo the real estate space, should work with Amazon to not simply use the space to do last mile order fulfillment, but also BOPAC (buy online pick up at curb). Think of it. What do malls have other than a lot of physical store space? Lots of parking and are usually located in convenient geographic locations. Amazon could offer customers the ability to come and pick up their orders as well. Create designated curb side pick up spots, create spots where patrons can pick up merchandise but also park for a period of time in case they want to also go into the mall to pick up something. Could Amazon take some of the real estate and create seasonal stores – small footprint stores with the high demand merchandise and other Amazon products. Much like what they already do with their pop up and other physical stores now. Finally leverage this footprint to process returns. Maybe once the patrons return items, they might also stop at the food court or see what is going on in the mall.
• Leverage the Amazon fulfillment know how – This might be a stretch, but what if the Amazon fulfillment anchor tenants, also took on last mile fulfillment for the other tenants on the property. Amazon is already working on becoming a 3PL, delivering and fulfilling for other brands and retailers. Imagine if as an anchor tenant, Amazon worked with the other tenants to deliver merchandise from the stores. Either last mile fulfillment or BOPAC. Of course they would make their money in the services they offered. While the tenants would be able to take advantage of the fulfillment infrastructure and knowledge of Amazon. This may feel like giving up even more to Amazon, but sometimes if you can’t beat them, join them.

While I am sure that mall owners would prefer that their anchor tenants were not named Amazon and that they could still draw the foot traffic needed to make the property profitable, those times are in the rear view mirror. Mall owners need to face today’s reality. Having an anchor tenant such as Amazon, using the real estate to fulfill eCommerce orders, might be one of the few ways to get someone to pay for that space. But if you can work with them to offer other services such as BOPAC or become a returns hub, you now have new ways to getting people into the mall.

Yes Amazon will continue to eat at some of the mall’s core business, but might as well try to profit from their physical presence. It isn’t a pretty relationship, but it might just give malls some extended life.

Retails secret weapon? Fulfillment.

A few recent items caught my attention, from a recent wave of advertisements from Target about their fulfillment options for customers as well as retail giant Walmart pushing their curb site delivery for grocery. Why is this interesting? These retailing giants are not advertising the amount or mix of their inventory they are offering consumers or their latest President’s sale. Instead they are touting their fulfillment services.

We have all heard the discussion around the need for retail to becoming more about experiences, customer service and personalization. The old adage from Morty Seinfeld that “cheap fabric and dim lighting” is what moves merchandise, does not apply in today’s digital world.

So what should consumers and retailers expect from this new digital world of retail, where fulfillment is becoming crucial to experience?

• Retailers look to lean on their physical assets to compete: Big retailers such as Target and Walmart will continue to find ways of leveraging their physical assets to offer greater fulfillment options. Look for more “frenemy” relationships to emerge – similar to Kohl’s accepting Amazon returns at their stores. As these retailers adapt their fulfillment options, they will need to revamp their physical assets as well. New warehouse layouts, smaller form distribution centers, stores taking on greater functionality, usage of different transportation means (think smaller form vehicles and even autonomous delivery), and least we ignore the labor aspect. Labor – in the store, in the warehouse and in delivery – all touch the customer at some level. Retailers need to recognize this need – hire, train and retain – accordingly. Brick and mortar retailers will find new ways to leverage their capital investments.
• Consumers expect greater options when it comes to fulfillment: Retailers will be forced to offer a greater range of fulfillment options, because we as consumers will expect this! Currently we are being told that next day delivery, even two hour delivery is the norm. Really? Why can’t I determine what day I receive my delivery? Or where it gets delivered, and I am not just suggesting my home or office. What about getting a delivery to the hotel I will be staying at for vacation? We are already seeing delivery to lockers or even the trunk of our cars. Apps like TripIt and Tripsource, are already scraping our data to organize our calendars. Telling us the weather and what sites to see based on our travels. Imagine marrying that information with fulfillment options? As consumers, we will start expecting that fulfillment will be a vital part of the overall retail experience.
• The rise of the fulfillment network as a service: Retailing giants such as Target and Walmart are two examples of new fulfillment hubs that will emerge. You might say, but isn’t that what Fedex, UPS, DHL etc etc have been doing? Absolutely. However we will start seeing a growing number of these hubs, driven not simply by aforementioned logistics players. There will be technology players such as Amazon, Shopify and eBay creating and driving their own fulfillment networks. Of course look for new entrants such as Roadie potentially adding increased physical assets, think warehouses, to their existing last mile fulfillment network. We will truly start seeing more fulfillment as a service offerings. Like mentioned above, this will create some potential frenemies. Regional retailers might leverage the Walmart fulfillment network to warehouse and fulfill online orders. Might sound crazy…but did anyone imagine Kohl’s letting in Amazon into their stores?

Fulfillment used to be seen as a cost center. Something that you had to spend money on…because you needed to get inventory to your stores in an inexpensive and timely manner. Today, fulfillment has taken on a much different role, a strategic on. Amazon has made it is priority to master this part of their business. Other retailers and brands are quickly catching up and in some cases offering some unique and innovative services.

A final question to think about…does the USPS have a play? The postal service has long been THE fulfillment network. But they have seen their value proposition erode away with less traditional mail being moved. But they have the infrastructure and most importantly the feet on the ground. For example, I spend 15 minutes the other day talking to Joe my postman. We talked about our dogs etc. He has a personal relationship with those on his route. As more fulfillment will be done away from stores and other physical locations, Joe becomes your interface with your customer. Can USPS leverage this?

Customization: more than monograms and pant hems.

We as consumers have demanded and started to expect that our brands and retailers provide us products that are personalized. Beyond simply adding our initials to the sleeves of our Ralph Lauren shirt or having to hem our new Hugo Boss suit, product customization is moving towards a place where the consumer can dictate what they want from the brands and retailers.

All one has to do is look at how we can customize our automobiles – BMW’s Spartanburg factory could run a full year worth of production and never produce the same car twice. Or how we can call up our sneaker companies such as Adidas, New Balance or Nike to create customized footwear for our enjoyment. The market is also seeing the rise of brands looking to create bespoken clothing such as Indochino, Suit Supply or MTailor who look to create suits, shirts and other items simply by taking your measurements over their apps. Of course these services are not without some growing pain issues…I have two Indochino suits that both have a sizing story associated with them!

Indochino suit…looks good. But it took some work to get here…

While customized products are becoming more of the norm, what brands and retailers need to starting thinking about goes beyond simply products. Customize the entire experience for consumers. The inventory is only a part of the overall retail ecosystem. Consumers expect greater information about their purchase, flexible fulfillment and friendly return policies.

• Greater information, greater insights expecting by consumers. The experience for consumers starts much earlier than it did 20 years ago. Brands and retailers need to be there when that journey begins. That means rich data, entertaining information and deeper knowledge sharing. Where did the product come from? How was it manufactured? What was its journey to its final destination? Can I customize this information – shopper A might be more environmentally conscious so give her lots of data on the sustainability efforts, while shopper B is more interested in how others use that product so give him YouTube videos or Instagram pages of how the product is being leveraged.
• 2 Hour fulfillment? Sure as long as it is one option. Retail giant Amazon has trained us that the 2 hour fulfillment window is nirvana. Is it really? While instant gratification, in this case 120 minute, is a driver for consumers, it is not always the right option for fulfillment. Savvy brands and retailers are starting to realize that they need to rethink this, rather than chasing Amazon, set their own strategy when it comes to order fulfillment. It is hard to compete when Amazon’s fulfillment costs, as they have only continued to rise to the tune of $34 billion annually. Fulfillment needs to be seen as part of the customization process. Want it delivered in 2 hours or in a month, sure. Need it shipped to a local pick up locker for you to retrieve after work, okay. Want it shipped to your vacation hotel next week, absolutely. Retailers and brands need to start thinking about customization in this context – when I want it isn’t always within 2 hours.
• Circular life of inventory demands for better returns. Returns and the circular aspects of retail are becoming of greater importance. Rather than viewing this as a cost center, savvy brands and retailers are seeing returns as a way to pull back working capital into their supply chains, as a touch point with customers and as overall good business. Retail giants such as Home Depot still view returns as a cost center, trying to minimize the overall cost of processing the returns as much as possible. A short term cost cutting strategy. While other retailers such as Kohl’s has been willing to take the chance, and dance with the devil, allowing Amazon returns to be processed within their stores. Inviting the biggest disruptor into your store! Smart. Get those customers into your physical store, allow them the ease of returning that Amazon item and yes try to sell them something from your inventory. I have heard customers say, “well I needed to get product A, and had to return this Amazon item, so might as well do it all at Kohl’s.” This is simply the beginning. More retailers will realize that they need to offer simple and customized returns for their products, sometimes it might call upon partnering with other players in the space.

Of course the drive towards greater product customization will continue. Whether it is your BMW X5 or your new pair of Adidas, we expect our brands and retailers to try to amaze us by better meeting our personalized needs. But it is simply not in the product, but in all that surrounds the retail experience.