Second life of physical stores
As the new Millennium rolled around I made a number of visits to the head office of Tesco.com in Hertfordshire to meet with its CEO John Browett who seemed to have something of an obsession with Ocado.
That Ocado had gone down the route of building dedicated warehouses (with some modest automation thrown in) for the fulfilment of online orders in total contrast to Tesco, which was fulfilling from its own stores, was keeping him up at night I reckoned.
Subscribe to TRBThe big question in his mind was whether the volume of online orders would reach a level whereby it would be impractical, or even impossible, to fulfil from local stores. The answer arguably came 20 years later. Apart from during Covid-19 the answer has been ‘no’. It is fair to say volumes have not been sufficiently high as to damage the experience in-store for regular shoppers.
Apart from opening the odd dedicated dotcom ‘dark store’ over the years Tesco has been able to continue leveraging its store-base for the handling of all its online grocery orders. This has also increasingly been the case with other retailers who are now finding that as shopper footfall drops in their stores these physical units can be used for fulfilling the growing levels of online orders.
This has certainly been the case for B&Q. Speaking at the recent Retail Week x The Grocer Live Thierry Garnier, CEO of Kingfisher, suggested: “The idea of the store as a place to buy in the future will not be the case…delivery from stores is better. Delivering from distribution centres (DCs) will be challenged.”
This thinking comes on the back of the fact as many as 93% of B&Q’s online orders are prepared in-store. He finds it the best way to compete with pure-plays as it leverages the retailer’s physical assets and enables orders to be fulfilled at speed. As much as 60% of the UK population can be reached in only 30-40 minutes.
US giant Walmart has come to the same conclusion as Kingfisher and its B&Q business about using stores as the logical way to deliver goods to customers. For grocery it is especially pertinent because of the perishability of fresh goods and the fact stores are invariably much closer to the end-customer than a DC.
To improve the efficiency at some of its stores it has built automated pick-up and delivery annexes that help reduce congestion in the aisles by placing high-volume lines in this separate
area. As demand for online continues to grow Walmart is boosting the fulfilment capabilities of its stores by adding annexes to 400 outlets – taking it well beyond the current 22.
This idea of stores as fulfilment centres is also being leveraged by the Co-op for its rapidly expanding quick-commerce proposition. For some outlets this 30-minute home delivery service is a meaningful part of their overall sales and works especially well in remote areas.
While using stores for online fulfilment is nothing new – just ask John Browett – there is a growing recognition that as online volumes increase and footfall in-store declines this additional activity is giving an increasing number of stores a second life.
