Back-Room Secrets

For all the attention focused on supply chain processes, from global sourcing to the end consumer, very little discussion is dedicated to how shipments are received into stores. The reason is perhaps quite pragmatic: Few retailers are willing to talk about what happens in their back rooms. When approached for this story, most declined to comment. However, there is a clear consensus among retailer expectations: Inventory should flow from the back room to the store floor as quickly as possibly. Back rooms, kept to a minimum footprint, are for processing shipments, not for storage.

Speaking on condition of anonymity, a specialty apparel retailer with more than 380 locations told Chain Store Age that inbound shipments are ideally on the selling floor the same day that they arrive at the store. Currently, the retailer uses FedEx for store deliveries and relies on FedEx to scan cartons at the time of delivery. An electronic acknowledgement is sent to the retailer verifying the receipt.

Reliance on transportation carriers and third-party logistics providers for storelevel logistics has become a dominant trend. The ultimate goal is to manage store deliveries so that store resources, specifically back-room space and labor, are utilized most efficiently and in-stock positioning is optimized. Velocity Express of Westport, Conn., provides time-definite regional and localized deliveries for a number of retailers, primarily in the pharmaceutical, office supply and furniture sectors.

Pharmacies in traditional drug stores as well as in grocery and super-store formats have some of the most stringent requirements for just-in-time (JIT) deliveries. Every inch of every footprint is at a premium, and neither the pharmacist nor technicians has time to receive shipments.

“A pharmacy retailer may need to receive deliveries before 6 a.m. to replenish stock or at a defined time slot when they have scheduled clerks specifically for receiving deliveries.” noted Drew Kronick, executive VP of business development and supply chain solutions for Velocity Express.

A national home-accessories and lifestyle retailer began using Velocity Express for furniture replenishment about 18 months ago. In a targeted Northeastern market where the retailer operates approximately 30 stores, Velocity Express makes daily deliveries to the stores, and in some cases may deliver multiple times to a single store. Valuable square footage that was once dedicated to back-room storage has been converted to selling space, and replenishment inventory of large furnishings is held in a centralized location. When furniture sells from the store floor, Velocity Express picks up at the central warehouse and delivers to the store that same day.

The JIT service is designed to deliver to whatever parameters the retailers set. In markets where there is a critical mass of stores, a fleet of trucks and drivers may be dedicated to a specific retailer.

Positive Returns

Hassle-free services impress shoppers

Perhaps there is a silver lining in the storm of returned merchandise that retailers face each January. Consider this: The person returning an unacceptable gift might be visiting your store for the first time and an efficient, positive returns process could create a one-on-one opportunity to convert that visitor into a loyal shopper.

“Ensuring a smooth and hassle-free returns process is vital for retailers, particularly if it’s the customer’s first visit to a store,” advised Linda Shea, senior VP and global managing director of customer loyalty practice at Princeton, N.J.-based Opinion Research Corp. “Getting the process right could mean potentially gaining a new customer; getting it wrong might alienate both the customer who initiated the return, as well as the one who made the initial purchase.”

Opinion Research Corp. (ORC), a division of Omaha, Neb.-based info USA, recently released the results of a survey it conducted of 1,024 individuals following the 2006 holiday season. According to the report, “The majority of retailers ‘got it right’ when dealing with customers at the returns counter.” Twenty percent of those surveyed reported they had a better impression of the store as a result of their returns experience.

One in seven respondents reported that the returns experience fell short of their expectations, but only one in 10 said they had encountered a problem when returning merchandise following the 2006 holiday season. However, ORC also reported “when expectations for the returns experience were not fully met, there was a substantial decrease in the likelihood of recommending the store to friends and family.”

The study also concluded that, of those who returned merchandise, two gifts per consumer were taken back to the store, and the average value of these returned gifts was $30 each. Women were more likely to return gifts than men; 27% of women said they would return unwanted gifts vs. 16% of men. Additionally, recipients with an annual household income of $75,000 or greater were more likely to return unwanted gifts than those with an annual income of less than $25,000.