More Retail Stores are Doubling as Micro-Fulfillment Centers

Those who are looking for a brand-new pair of cowboy boots have more options nearby, at retailers that carry more inventory, and that can ship the product to their customers in less time.

Such is the business model for Boot Barn, with 300 stores nationwide. The same goes for larger retailers such as Walmart, Walgreens, and Target.

This is helping sales because, as Colliers’ Brewster Smith writes, “Consumer purchasing choices are more frequently predicated by order-to-delivery cycle time than ever before and as a result, corporations are making demonstrable adjustments to their supply chains to maintain or increase their market share.”

He said that a popular operating strategy among retailers right now is shipping orders from store locations, effectively treating stores as micro-fulfillment centers.

Retailers are benefiting from the strategy and investing more in it. Walmart has increased its store-fulfilled delivery sales by more than 200% in recent years, generating $1 billion a month in the [ship-from-store] category and Target has announced a $100 million investment plan to increase their store footprints for next-day deliveries.

Walgreens is repurposing 8,700 retail stores to function as both retail outlets and hubs for home deliveries. Its employees are required to serve in-store customers and pick and pack items for same-day home delivery.

It’s a lot of work, but the result is faster order delivery speed, Smith said, with Project44, reporting that last-mile order-to-delivery cycle times have improved from 5.8 days in April 2021 to 3.8 days in April of 2023.

Even peak season parcel capacity constraints are not expected to impede this trend because the U.S. Postal Service, FedEx and UPS have capacity to meet projected demand, according to Smith.

UPS and USPS have hired about 100,000 and 10,000 seasonal workers, respectively, to meet that need, enabling the parcel industry has capacity to deliver more than 120 million parcels per day.

Smith said retailers wanting to adopt this strategy require their physical locations to be retrofitted to hold more inventory, accommodate additional associates to do online order picking, packing and parcel trailer loading while maintaining a pleasant in-store buying experience for walk-in customers.

These multi-channel storefronts require more granular demand forecasting, inventory targeting, and merchandise rationalization to ensure that every cubic foot of a location is optimally utilized, he said.