Zara taps into stores for e-commerce fulfillment

Dive Brief:

Spanish fast-fashion retailer Zara is moving forward with a store-based fulfillment plan that executives in June said would support same-day delivery in cities where it has both stores and e-commerce, and otherwise it will offer next-day shipping.
By the company's mid-June quarterly conference call, it had full integration between online and store stockrooms in 20 markets. CEO Pablo Isla said then that would be "fully rolled out by the end of the year in all markets where Zara has online presence," according to a conference call transcript from the company.
Isla said of the reasoning behind Zara's efforts, "What is very relevant for us is what is coming in terms of full price sales during the season."

Dive Insight:

At first glance, it stands to reason that retailers with expansive store fleets should be able to tap those inventories to support local digital sales. Target, Walmart, Asos, Toys R Us and others have tried it with varying degrees of success. But it's a logistical puzzle that's not all that easy to work out.

"Typical in-store inventory accuracy is 60%," David Landau, executive vice president of transportation management systems provider Cloud Logistics, told Retail Dive earlier this year. "And if it's not in the store, then you may or may not be able to same-day ship. Even if it's in store, you may not know where it is in the store. And then on the transportation side, in terms of doing this as local delivery, it's challenging and expensive and fraught with risk."

Leave it to Inditex's Zara, which years ago sped up fashion production and logistics through supply chain innovations that remain ongoing, to make that seem easy. Isla in June seemed to shrug off questions about how the retailer could pull off its ambitious store-based fulfillment goals by the end of the year, emphasizing that in some cases it would be the best way to satisfy customers' online orders.

"This is something very, very strategic for us, this idea of full integration between store and online stockrooms, which is enabled by RFID," he told analysts in June, adding later that the impact to costs and inventory was slight, yet all-important in serving customers.

The ability is helping. As with fast fashion itself, if Zara is indeed pulling this off, it will be yet another reason to study its success, according to Bill Friend, North America managing director at cloud-based order management firm Fluent Commerce. Friend said that retailers that master the practice "will be the ones that we will be talking about for the next decade."

"Fulfilling online orders from store inventory unleashes a whole new wave of opportunity for retailers with large store networks to compete with Amazon," he told Retail Dive in an email. "As consumers continue to shift towards convenience as a key driver for purchasing decisions, retailers who can get the desired product into the consumers hands quickly and free of shipping charges will win the battle for full-price shoppers who want what they want, when they want it."