Leveraging flexible fulfillment has not been an easy task for Target, but by implementing ship-to-store, order pickup and ship-from-store, the big-box retailer has managed to become an omnichannel leader.
Since 2012, Target has made a conscious effort of putting its customers first when it comes to connecting its online and physical stores together.
“Other retailers were figuring it out, but we weren’t, we were focused on growing our stores,” said Karl Bracken, Senior Vice-President of Supply Chain Transformation at Target during IRCE 2016. “We had to differentiate from an operational standpoint.”
A key differentiator Bracken said was that they owned their stores and knew they had to enable digital growth within the stores.
In 2012 it was still operating under two separate supply chains – one for its store, and one for its online presence. It was tasked with figuring out how to use its in-store inventory for online purchases.
“Our helpful in-person service could be a differentiator for us,” said Bracken. “We knew we had to use the store for fulfillment.”
Bracken said they looked at what guests wanted presently and what they would want in the future. They also studied other retailers and opted to lead with order pickup as the easiest thing to do.
“It was valuable to our guests, we knew it would lead to other opportunities,” said Bracken.
Some of the initial concerns with order pickup included extra payroll and workload, process changes, system stability, out-of-stock issues in store, abandoned orders, in-store versus online guest priority.
Bracken said systems issues centered on the difficulty of picking product; items not found rates were higher than projected, lack of space to hold online orders were also an issue.
In order to make improvements, Target remodeled its in-store pick up area along with getting creative with existing space.
Ship-from-store was the next option Target implemented, however some of the challenges included routing orders to the store, picking product efficiently and packing and shipping on time.
“We had to get a lot more efficient with store process,” said Bracken.
Some lessons Target learned included identifying new inventory thresholds, making changes to the system, integrating inventory. Ship-from-store has allowed Target to cut shipping time for customers and reduce out of stock and lowered costs.
Target recently launched ship-to-store in highly urban format stores. Fifteen percent of online sales have been fulfilled by order pickup.
“It’s given us the capacity to get more sales and drive traffic to the stores,” said Bracken. “I did not expect order pickup to be as big as it was.”
Bracken said 30% of online holiday orders were filled by stores and has been a big win for Target customers.
“Forty percent of order pickup and ship from store saved our sales,” said Bracken. “Our stores saved digital sales.”
Bracken said flexible fulfillment is now simply core to retailers. Looking ahead, Target plans to use stores as fulfillment, there will be system and process enhancements and more.
“We have to use our store team members as a competitive weapon,” said Bracken. “Our guests have to be our guide.”