Of the top 130 UK fashion and footwear retailers, 55% now have transactional websites, and are faced with the challenge of multi-channel fulfilment. The majority of these retailers use separate physical operations and processes to fulfil non-store orders.
A recent study by retail consultancy CVL has revealed that running separate fulfilment centres (FCs) can cost twice as much per order as fulfilling from integrated distribution centres (DCs) and erode up to 6% of net margin. In the current challenging economic climate, this can make the difference between profit and loss for retailers.
Separate fulfilment centres result in duplicated product handling, storage and fixed costs and generate additional and more complex processes. This leads to slower customer response times and increased risks of stock-outs or unsold stock at the end of a season.
The implication for retailers is that there is a big margin prize to be had by moving to integrated fulfilment through distribution centres that hold inventory, pick and dispatch product for both stores and online customers.
However, achieving integrated fulfilment is challenging, even for sophisticated retailers. The barriers to overcome are the physical infrastructure and processes, inventory management and organisation, plus IT systems.
Retailers must understand their true fulfilment costs, which vary across channels and fulfilment solutions. A thorough analysis will guide retailers’ multi-channel strategies.
The report by CVL describes the challenges to achieve integrated fulfilment and ways to overcome them. It is available from www.cvluk.com.
Ray Fowler is a director of CVL, a business and technology consultancy