Some of the world's largest retailers are turning their stores into mini distribution hubs to help them compete better online against Amazon.com.
Instead of fulfilling Web orders from warehouses hundreds of miles from shoppers' homes, companies including Walmart, Best Buy and Gap are routing orders to stores nearby.
Store employees pick products from shelves, pack them into boxes and drop them into waiting FedEx and UPS trucks that zip off to homes a few miles away.
The trend, known as ship-from-store, saves money through shorter delivery routes. More important, it speeds deliveries, avoids costly markdowns and recoups sales that have been lost to Amazon, the world's largest Internet retailer.
"This is the most important thing that will change physical retailers over the next five years," said Matt Nemer, a retail industry analyst at Wells Fargo Securities.
A network of large stores -- with high overhead costs -- has become a liability rather than an asset in recent years. Amazon, which has no stores, won market share with lower prices and huge selection. But retailers have begun fighting back by using technology to get more sales out of stores -- and ship-from-store is a big part of the effort.
"Amazon has already beaten most retailers on price and selection. The third battleground is location, and the smart retailers are not conceding that," said Tom Allason, founder of start-up Shutl, which helps retailers deliver online orders from stores.
Shutl's service covers most shoppers in the U.K., where the firm partners with retailers including Argos, Oasis and Karen Millen. The start-up is also in Manhattan and plans to expand soon to other big U.S. cities, including Los Angeles, Miami and San Francisco.
Walmart, the world's largest retailer, has been shipping online orders from some stores for about two years, and about 35 stores do this now.
"We started ship-from-store as a test. It has exceeded every expectation we've had for it," said Neil Ashe, head of global e-commerce at Walmart. "We will probably scale this to hundreds of stores."
Ahead of the Game
Already, 10% of the items ordered on Walmart.com are shipped from stores, and the majority of those packages are delivered in two days or less, according to the company.
Two-thirds of the U.S. population live within 5 miles of a Walmart, so the company is using these locations as "nodes" in a broader distribution network that includes storage warehouses and specific fulfillment centers for online orders, Ashe explained. (continued...)
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