An Imporved E-commerce Distribution System by Howard Kier, MBA, ABI, CPP

Many brick and mortar stores are not taking full advantage of their physical locations to compete with e-tailers such as Amazon.  Some chains such as Wal-mart and Bestbuy do provide ship to store for internet purchases.  However, most other internet purchases are shipped from centralized warehouses.  When shipping via UPS or FedEx, these parcels cross multiple zones and thus incur additional expenses.  But what if the brick and mortar retailer utilized their existing locations to ship purchases to their internet customer?  How would such a system operate?

Based on the premise retail locations carry the 20% of the products which account for 80% of their sales, the locale store will be able to fulfill 80% of the internet purchases.  The other 20% will reside in a warehouse.  Those purchases can be shipped to a local store utilizing the existing store merchandise replenishment system.  In many cases the freight trucks having excess space available for the additional cargo.

Once the internet order arrives in the store, it can be injected into the UPS or FedEx system.  At this point the retailer has assured the parcel will remain within one carrier shipping zone or cross at most one boundary.   As most carriers compute their shipping charges based on the number of zones the parcel crosses, local shipping reduces the fee by reducing the number of carrier zones.  In many cases the increased cost of the retailer shipping product to stores for local fulfillment is more than offset by the savings realized by reducing the carriers' zones.  In some cases, that can be a 25% savings!

The actual details of how such a system would work will differ for each retailer based on how their store replenishment systems function.  However, the basis premise is the same.  Move the product as close to the consumer as possible utilizing existing company cargo systems before relinquishing control to a common carrier.  Parcels can either be packaged and addressed at a centralized location or at the store.  The key is minimizing the distance from the retailer to the consumer before the common carrier obtains the package.  The shorter that distance, the lower the shipping fees paid to FedEx and UPS.  Many retailers should experience savings of 10% or more!