At the #OpsSummit it was interesting to learn that successful blue jean maker Lucky Brand is addressing its eCommerce challenges using a slightly different approach, called Buy Online Pick In Store (or “BOPIS”). BOPIS means the customer may not pick up a previously purchased item at the store; however the store may ship the item.
Lucky Brand has a wholesale, retail, and an eCommerce channel that are each separate P&Ls. Lucky Brand has three DCs but they are moving into one single multi-channel DC run by Radial, their 3PL. POs will be shared by the retail/eCommerce channels, but wholesale units will be locked down and allocated before all other channel units.
The “secret sauce” to Lucky Brand’s version of multi-channel is the distributed order management system (DOMS) that decides how to fulfill an online order. LB uses a machine learning product from Celect to make the decision. This logic is EXTREMELY smart. For example, before installing CELECT LB would, like many retailers, use very unsophisticated logic to choose which store was asked to fill an eCommerce order when the warehouse ran short of a needed item. Historically, those orders were usually passed to larger stores in affluent areas, where the most inventory was on hand, but these stores were also the ones that had the greatest probability of selling the product in-store at a higher margin and without markdowns.
The software, once installed, started allocating these sorts of eCommerce orders to the smaller stores (where markdowns were more likely), rather than to the larger stores. The result has been an increase of $2.4m in overall sales based on LB’s analysis. While inventory accuracy in the stores has been critical to their BOPIS/multi-channel success, they have not implemented CC’s in the stores to increase store inventory accuracy. They have focused much of their research on improving both transaction integrity and inventory record keeping. LB also says that if they show less than 10 units of an item in a store they won’t allocate there. LB also buys far more than they need, and this helps serve as a “safety stock” to bolster inventory positions.
Another key to Lucky Brand’s BOPIS strategy has been to avoid markdown sales, which take up store associate time on very-low-margin purchases. They changed the filter for what markdowns could be advertised on the web. This decreased the number of markdown items for sale, but margins on BOPIS sales increased from 33% to 39%. Markdowns, conversely, went from 67% to 53% of the BOPIS sales.
Achieving Same-Day Delivery with Urban Distribution
Amazon’s same-day delivery service offering has put pressure on other retailers to follow suit to stay competitive. For example, Best Buy and Bloomscape both are using stores to pick product that customers want to be delivered the same day. Best Buy and Bloomscape are also both using crowd-sourced delivery companies to pick up same-day orders that are picked in their stores.
These delivery firms do not necessarily wear uniforms that represent the brands they are delivering. To manage customer expectations, Best Buy communicates to the customer that the person delivering the order may not be in a Best Buy branded outfit. Best Buy sends a message to the delivery company immediately before the order is picked to confirm capacity. They then send a second message once the order is packed and ready to pick up.
Best Buy charges $5.99 for same-day delivery. A key caution is not to offer same-day option on everything a retailer sells. Since the seller is forced to subsidize the true cost of this service, it pays to be selective about which products receive the same-day-delivery option. There are certain items where same-day delivery makes sense, but a retailer may not realize what those are until after running and testing a pilot program.
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