Ship-from-Store Making Retail Distribution Points a New Thing
Amazon has not had any physical stores – well, at least not until this last year. Their retail model is practically all distribution and they have been trying to eat physical retail’s lunch. So in the past couple years, large rivals like Wal-Mart and Kroger introduced its online ordering and pickup service in select locations, which have been rolled out into all primary and secondary markets, as well as tertiary markets this year.
If any name brand retailer can pull it off, Wal-Mart can. Customers do all of their shopping online and request to pick up at the store. On its face, it seems spectacular. You avoid the long lines in-store, you get exactly what you want, and it’s bagged and loaded for you. But you still have to get in your car, drive to the store, wait to have the goods loaded and then drive them home.
It’s not as convenient as ordering same-day delivery from Amazon. But what if instead of having to pick up your order at Wal-Mart, it could all be delivered to you from your local Wal-Mart store? That’s the idea of ship-from-store; using retail locations as distribution points leveraged against multimodal omni-channel deliveries.
Amazon Seeks to Crush Brick-and-Mortar
Wal-Mart is facing a new powerful rival. Amazon’s plan to build at least a hundred new cashless brick-and-mortar grocery stores may not be necessary. In June, Amazon announced its plans to acquire Whole Foods with its 460+ physical stores throughout the U.S. and Canada. The news sent Wal-Mart stock down 7% and the grocery store giant Kroger saw its stock fall by 17% after the deal was announced. The sale of Whole Foods closed at the end of August and immediately they cut their prices, as much as 43% on certain items, the first day they took the reins.
Amazon plans to immediately ramp up its physical presence, happened in one fell swoop. In an effort to seize on the ship-from-store trend, the online retail giant plans to use the newly purchased whole food stores as distribution points for local deliveries.
Ideal for Regional Retailers
Granted, most retailers don’t have the retail space that most Walmart locations do. Some local retailers are just not setup to turn their small storefront into a distribution center. But a regional retailer, with dozens of locations within a particular area could slash costs incurred to maintain distribution centers by using their physical stores for both in-store shopping and fulfillment and distribution of online orders.
It also cuts the growing costs of maintaining full inventories at several warehouses throughout the region. Retailers would have a clearer view of the demand for their products and can use that to get a better sense of the demand for certain products, thereby allowing them to better adjust their inventory.
Most importantly, it enables local retailers to provide the same service that Amazon does to a customer base that expects delivery on-demand. Once upon a time, if you ordered something online and received it a week later, that was considered fast delivery. Now, consumers want their orders in two days or less and statistics show that more than 80% will not place an order if the shipping costs are too high or it takes longer than a week for delivery.
What Does Ship-from-Store Mean for the Industrial Sector?
For the industrial sector, this trend means new ways of marketing your assets to retailers. Instead of focusing on the convenience of distribution centers and warehouses in the area, commercial real estate brokers can help buyers and renters find the types of industrial buildings for their local stores that can handle the load required to pull off a storefront distribution center that can handle the demand for ship-from-store.
Physical retail stores are facing many new innovations aimed at revitalizing big industrial spaces to accommodate the demand created by e-commerce. Ship-from-store is just the latest trend that is showing encouraging signs for more nimble retailers to meet their customers’ demands in the same way that giants like Wal-Mart and Amazon have been able to do for years.
The winds of change seem constant for Brick-and-Mortar Commercial Real Estate and will continue to be that way for the foreseeable future. We have experience in both the retail and industrial real estate sectors and can help you walk that fine line between the two.
By Micah McCullough, CCIM