February 5, 2019
By Dennis Kaiser
Shopping Fulfillment Centers (SFC) are a new model set to emerge in the retail sector this year. SFC’s are expected to deliver a blend of next generation omnichannel technology, retail and logistics services to retailers. This “all-encompassing suite” includes online fulfillment, drive-through pickup, regional distribution to other stores, store design and even operations.
One of the first examples of this new retail industry wrinkle is being introduced by New York-based Case Equity Partners at a cluster of five suburban retail properties in major cities. This hybrid retail and fulfillment concept is expected to increase sales while cutting retailing costs and time to market. The SFC is also expected to drastically reduce the burden of returns.
Coming in fall 2019, the initial iteration will feature a turn-key multi-season shop specifically curated for the retailer, backed by an on-site last mile fulfillment center. The plug-and-play logistics component will fulfill/distribute to store, home and satellite store, and its tenancy will consist of both digital native and traditional transitioning retailers.
The process of fulfilling online orders involves storing, picking and shipping individual products. While maintaining a store network and stocking shelves involves receiving pallets at regional distribution center, and sending cases to stores.
A downside to a traditional retail model is the fact that there’s little or no crossover between selling channels. And, rolling out a store network requires significant investment and a steep commitment from both an eCommerce and store perspective. Typically, digital native brands have added physical locations as a marketing strategy, and those stores offered little or no product on-hand, thus sales were lower.
The SFC’s unparalleled infrastructure, which brings together both sales channels, allows digital native brands to accelerate quickly from having no stores to being able to cover an entire market. And, aside from inventory and store design, there’s not much up-front investment required. That also plays well to one of the drivers behind a digital native brand’s cost reduction strategy for opening up a physical store. The benefits of SFC’s include: they can be an effective sales channel, while working to cut customer acquisition costs, and retailers are expected to see reduced logistics and returns costs.
Shoppers benefit from this SFC and offline retail strategy, too. Their quest for instant gratification can be met, since they aren’t waiting for a product to ship because retailers in a SFC network are able to have a larger assortment of products in stock at all times. That allows customers to touch and feel a product, which is also expected to help reduce order and return cycles, since shoppers can buy the right product the first time. Another benefit of a SFC is it will enhance the buying online and picking up in store model. The process can be managed in an adjacent, well-organized fulfillment center, which will allow products to be picked with greater speed and efficiency.
For comments, questions or concerns, please contact Dennis Kaiser