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Store Fulfillment Stockouts: No More Empty Shelves
Logistics & AI
October 11, 2023
Store-based fulfillment decreases shipping times and improves ecommerce experiences by having local stores fulfill online orders with inventory that’s also available to in-store shoppers. However, this omnichannel fulfillment method can make retailers vulnerable to stockouts that leave shelves bare and compromise in-store shopping experiences.
How stockouts happen with store-based fulfillment?
Before “ship-from-store” became a popular method of ecommerce fulfillment, 72% of in-store stockouts happened due to faulty in-store ordering and replenishing practices. Many retailers solved this challenge with IT solutions. However, these solutions were not built with ecommerce in mind and became untenable when retailers started adopting omnichannel fulfillment.
There are still many causes of in-store stockouts today, but the following scenario is often what plays out when ecommerce fulfillment is responsible.
An order is placed:
A customer places an online order for a product. The company’s ecommerce platform calls a service that chooses a store location with the item in stock to fulfill the order.
Inventory is deducted:
Once the store is selected for fulfillment, the inventory management system deducts the ordered item from the store's available stock. The item is now reserved for the online order and is no longer available for in-store customers.
An order is picked:
Store associates receive a notification to pick the item from the shelves, similar to how they’d pick an item for a buy online, pickup in-store (BOPIS) order. The item is removed from the sales floor to fulfill the online order.
Online demand surges:
If the online demand for specific items is high, more and more stock is pulled from the store shelves to fulfill online orders. This can rapidly deplete in-store inventory, especially for popular items.
Shoppers go somewhere else:
Many in-store customers, finding shelves empty, go to another store. An HBR study found that 21% to 43% of shoppers will go to another store to buy the item while 7% to 25% will continue shopping but won’t buy a substitute for their desired item.
How to avoid ship-from-store stockouts?
The following three steps will help you minimize stockouts when integrating ecommerce fulfillment with in-store inventory.
Step 1: Unify inventory management
When an item is sold in-store or online, the inventory count should immediately reflect the sale in your inventory management system. This minimizes the chances of selling an item online that's no longer available in the store.
Employees and systems should also have visibility into inventory levels across all sales channels (in-store, online, and other retail locations). This will help them make informed decisions about where to pull inventory from for online orders, especially when there's limited stock.
Step 2: Establish safety stock levels
Set a safety stock level for popular items. This will act as a buffer to prevent stockouts. For example, if you determine that a safety stock level for a particular item is 10 units, the item will show as "out of stock" for online orders once there are only 10 units left, even though those units are still available in the store.
Adjust these safety stock levels based on sales trends, seasonality, and promotions.
Step 3: Optimize order fulfillment
If you have multiple stores, prioritize which store will fulfill an online order based on several factors like stock levels, proximity to the customer, and current store traffic.
Some retailers set aside a specific section of their inventory solely for e-commerce orders. While this might not be feasible for all products or retailers, it's an option to consider for best-selling items.
How Gamestop avoided store fulfillment stockouts?
Gamestop is notorious for adopting ship-from-store fulfillment early on without compromising their beloved in-store shopping experience.
In 2016, GameStop implemented this fulfillment strategy to triple its e-commerce inventory. By teaming up with a third-party technology provider, GameStop was able to link in-store POS systems with its online order management systems to offload excess inventory.
This connection facilitated the ship-from-store method that was particularly advantageous for GameStop given its trade-in model. Linking store-based inventory with ecommerce channels helped them offload excess games (old versions of games that were traded in for new ones).
However, store-based fulfillment didn’t work for every company around this time. In 2015, Target relied too heavily on store inventory for online orders which led to stockouts in physical locations.
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Additional resources for optimizing ship-from-store
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