The continued expansion of eCommerce has put pressure on the in-store sales of many retailers, including Walmart. A recent US Census report showed that eCommerce has grown from 3.5% in 2008 to 9.0% in 2017 , and according to a recent UPS / comScore survey, consumers who shop online, now make more than 50% of their purchases over the internet . Some companies have taken advantage of this growth. For example, Amazon has increased its North American retail sales from $16bn to $80bn over the last six years .
In this increasingly digital market, Walmart, along with other companies with large store bases, have shown signs of struggle. However, many in the industry tend to overlook one potential benefit – the option to ship goods directly from stores instead of warehouses. Shipping from stores could lower the time and cost of last mile delivery, as stores are convenient for delivery drivers, closer to consumers, and many have the required inventory. This could allow Walmart to use its 4,741 U.S. stores as a competitive advantage.
For Walmart to create a successful ship from store model, it must make its supply chain more digital. The company must have the ability to accurately complete last mile delivery, improve inventory tracking in each store, streamline the process to pick items from shelves, and develop the analytics to decide when to ship from store instead of from a warehouse.
Recent Initiatives to Digitize the Supply Chain
Walmart has attempted to utilize existing logistics technology required to enable the last mile delivery for ship from store. The company tested using Uber and Lyft for delivery in 2016 , and in 2017 piloted using Walmart store employees to make the deliveries with the goal of delivering packages quicker than online competitors could . Additionally, the company recently acquired Parcel, a last mile delivery service primarily in New York, that has technology to coordinate delivery fleets and allows consumers to track their driver and delivery .
Walmart has also attempted to address the requirement for better information on in-store inventory. Accurate information on inventory stock and location is essential to minimize pick time and maximize labor utility. In 2003, the company first tested RFID technology that would allow employees to know the exact inventory count and location for each SKU, but it did not go through with the initiative due to cost. Since that time the performance of RFID chips has increased, and the price of a chip has declined by 90% . More retailers have adopted the technology and it appears that it could be a cost-effective solution to tracking the store inventory. The company also partnered with IBM earlier this year to test blockchain tracking for food , but this technology is not fully developed yet.
Future Walmart Logistics Investments
Walmart should continue to invest in its supply chain to make ship from store a potential edge as eCommerce sales continue to increase. In addition to the focus on inventory tracking and technology to enable last mile delivery, Walmart needs to develop prescriptive supply chain analytics to automate decision making. Some industry experts such as PWC have suggested that if a company has a fully digitalized supply chain with complete inventory visibility, it could build an analytics system to find an optimal solution for delivery . As Walmart improves visibility on in store inventory the company should simultaneously develop a system that will consolidate data on the inventory, demand and cost inputs. This would allow Walmart to shift its fulfillment decision between traditional warehouse fulfilment and ship from store to optimize for shipping timing and cost.
At the same time, Walmart needs to test and develop internal processes and technology for picking and packing items in store for the ship from store initiative to be successful. The best way to accomplish this would be to test different processes across different stores and share the learnings and best practices that are discovered. This would also be a good way to determine the control mechanisms needed to ensure accuracy and inventory levels prior to rolling it out to all the stores.
What steps should Walmart take to avoid negatively impacting the in-store experience if they fully implement ship from store? And should Walmart continue to pursue addressing this topic with acquisitions (as with the Parcel acquisition) or invest to organically create the required technology?
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