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Journalism of Courage
The increased emphasis on store pick-up comes in response to last year’s debacle, when millions of holiday packages were left stranded after a late surge of express-delivery orders overwhelmed retailers.
Wal-Mart Stores Inc, Target Corp, Best Buy Co Inc and Lowe’s Cos Inc and other merchants are combining in-store pickup with lower online prices to draw shoppers to their stores. The hope? Customers will make additional purchases.
But the shift is forcing chains to carry a wider array of products and could overwhelm inventory management systems. Also: many stores might not have storage for all the extra goods.
“Most retailers are still trying to figure out where is the right place to position this additional inventory…a lot of them aren’t quite prepared,” said Michael DuVall, a supply chain consultant for Strategy&, formerly Booz & Co.
A supply chain consultant who works with Wal-Mart, and spoke on condition of anonymity, said the retailer’s inventory costs are growing because Wal-Mart is stocking additional merchandise so it can fulfill online orders being picked up at stores.
“They are having a hard time keeping that (stock) consistent with what they need,” the consultant said.
A Wal-Mart spokeswoman, in response to the consultant, said the company has inventory and processes in place for the holiday season.
Best Buy CEO Hubert Joly acknowledged inventory management is a challenge. “Stores that boost inventory to meet just the in-store pickup demand face a risk of being stuck with excess,” Joly told Reuters. Still, he added, the chain has a lot of experience with in-store pickups. Forty percent of Best Buy’s online revenue already comes from orders picked up in the store.
Some retailers, meanwhile, are establishing special distribution centres called “dark warehouses,” partly because traditional storage facilities can’t handle the small daily quantities associated with store pickup.
Dark warehouses, so-named because they are almost always unmanned, cater to five to 25 stores at once. Truck drivers drop off and stock the merchandise; stores send small teams to collect the goods.
A retailer might spend $1 million to set up a 100,000-square-foot dark warehouse, DuVall said, but that would still be less costly than storing the additional inventory.
