By Paul Ziobro
As thousands of shoppers wait outside Target Corp. stores on
Thanksgiving Day to buy toys, electronics and kitchen gadgets,
workers inside are getting ready to send some of those very items
out the door.
The Minneapolis-based retailer is enlisting small teams of
workers in about one-quarter of its 1,800 U.S. stores to pack up
some of the orders placed through Target.com earlier in the day.
The employees work in shifts, in a few cases starting up to 10
hours before the official 6 p.m. store opening, navigating dimly
lighted aisles and picking items to mail to customers who pounced
on Web deals hours before shoppers could in a store.
The strategy is a new twist on the Black Friday weekend. What
for decades had been a purely in-store shopping frenzy has ceded
much ground to the Internet. A Deloitte LLP survey found shoppers
expect to spend 59% of their money online for the four days
starting Thursday, compared with 36% in stores. The remaining 5% is
spent on catalogs.
Heather Douglass of Denver is one of those shoppers online. The
41-year-old pastry chef planned to log onto her computer around
midnight and hit Target.com for discounted clothes, books and boots
for her two teenage daughters, plus anything else she stumbles
upon. "Once I start browsing, I find more things that I don't need
but wind up buying anyway, " she says.
Ms. Douglass says she has a better chance of getting what she
wants online. Still, she planned to visit actual stores later on
Thanksgiving, a couple hours after the first wave of shoppers
enter. The first stop: Target. "We'll go look at stuff we couldn't
find online."
The growth in online spending is affecting how one of the
nation's largest retailers operates on one of the busiest and most
important shopping days of the year. The change is born out of a
need to cut down on delivery time and shipping costs to keep pace
with Amazon.com Inc., and to put inventory sitting on store shelves
to better use by using it to fulfill orders coming from the
Internet.
"It's a sign of the times," says Rodney Sides, a vice chairman
at the consultancy Deloitte. "With the shift online, you've got to
take advantage of the inventory where it is and when you can."
Physical retailers have long grappled with managing the
logistics of online sales. The problem stems from a legacy that
includes hundreds of stores that must be filled with millions of
pieces of inventory and manned by thousands of employees. Layered
on top of that is a network of online fulfillment centers.
Amazon and other pure-play online retailers don't have that
complexity. They can spread out inventory at a smaller number of
locations--Amazon says it has more than 50 distribution
centers--and focus on shipping packages. The online giant is
compressing shipping times further, with same-day delivery
available in 16 metro areas free for members of its Prime service,
and offering to deliver orders in as little as an hour in some
markets.
Retailers call their answer omnichannel, a strategy that views
all inventory the same and uses algorithms to calculate whether it
makes more sense to ship online orders from a distribution center
or a store. In some cases, customers want the order ready at a
store to pick up.
Shipping from stores is a big part of the plan. The National
Retail Federation says nearly one-third of retailers are working on
shipping products from stores. However, many take a pause during
the busiest times of the year, and none is taking it as far as
Target this year. Best Buy Co., Macy's Inc. and Wal-Mart Stores
Inc. all are open Thanksgiving, but will suspend efforts to ship
items from stores.
"It's just a very busy time," says Dan Toporek, a spokesman for
Wal-Mart, which plans to ship nearly all online orders from
distribution centers in the 48 hours around Black Friday. "We want
to make sure we're delivering the best experience in stores for
customers."
While the logistics of shipping from stores before the rush of
Thanksgiving shoppers can make sense--stores will be empty, orders
will be easy to find before the crowds mess up things--the
financials can be a challenge. The biggest cost of shipping from
store is labor, analysts say, and holiday-pay rates mean it costs
at least 1.5-times more than normal. "Ship from store can turn the
model upside down if you're not careful," Mr. Sides says.
Retailers face additional margin pressures from shoppers, who
don't want to pay shipping fees. Best Buy and Target have
eliminated shipping charges on all orders for the holidays.
Wal-Mart, meanwhile, has a $50 threshold to eliminate the
charge.
There is also the incongruity of whittling your inventory on one
of the few appointment shopping days of the year. "All of your
efforts have been toward driving traffic to stores," says Nikki
Baird, managing partner at Retail Systems Research, a research
firm. "Why would you then ship from stores to meet demand that's
coming from online?"
Target isn't shipping out of stores some of the most heavily
advertised items. The prime deals--$249 55-inch televisions and
$395 drones with high-definition cameras--are reserved for shoppers
in stores, says Eddie Baeb, a spokesman. Anyone buying those items
on Target.com on Thursday, where the same deals are available, will
get them from distribution centers. For the nonrestricted items,
once store inventory gets down to a certain level, that location
will stop shipping it.
Target has 462 stores around the country shipping items from
stores. Most will have workers arrive two to four hours before
Thursday's opening. Forty-four stores meanwhile have souped up
shipping operations with expanded backrooms for packing up to 1,500
orders a day. There, workers will start at least four hours before
shoppers arrive.
Robert DeMarino arrived at the Jersey City, N.J., Target store
he manages around 7:30 in the morning Thursday to oversee a team of
10 workers on the ship-from-store team. Plenty of the orders were
concentrated in the toy and electronics sections, he says. By
mid-morning, the store was well on its way toward hitting its goal
of shipping 900 orders, up from 500 on normal days, and getting
most of it done before shoppers start to stream in.
"This is nice for one day to just not have any distractions," he
says. "We want to make sure that come 6 o'clock, we're ahead of the
game and helping our guests with anything they need in the
store."
The strategy is also part necessity. Target has nine online
fulfillment centers and some of them will churn out eight-times the
number of orders on Friday versus a normal day. But that isn't
enough, and they need the stores to help with the sheer volume.
Target expects stores to process one million online orders in
store--whether shipping them out or holding for pickup--between
Thursday and Sunday.
The torrid pace will continue throughout the holidays. For the
quarter, Target expects 40% of orders to be shipping from stores,
up from 25% normally.
Drew FitzGerald, Suzanne Kapner and Sarah Nassauer contributed
to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 26, 2015 11:46 ET (16:46 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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