Macy's Grows Order Fulfillment Centers To 500
By Sam Lewis
Department store chain using stores as distribution centers
In an effort to maximize in-store shopping and increase online efficiency, Cincinnati-based Macy’s has expanded its fulfillment network to include a total of 500 stores. The company added 200 stores to this effort over the summer, with two-thirds now participating companywide.
Most often, online order fulfillment is directed toward the store closest to the buyer which decreases shipping times and costs, but other factors, like inventory levels, are also considered. Here is how fulfilling online orders in-store works. The morning staff of each Macy’s store is given a manifest of items ordered online which will ship from that store. The associates collect these items, bringing them to a station, often unused stockroom space, to be wrapped and tagged for delivery.
On any given day, one Macy’s store handles 50 to 60 online orders, which are shipped out in the afternoon via UPS pickup. On days of big sales, the number of orders per store jumps to 75 to 100. Post-Thanksgiving, holiday shopping days are normally met with 300 to 400 orders to be shipped out every day. Some simple arithmetic brings daily shipments during the holidays to 150,000 to 200,000 across all stores used as fulfillment centers.
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Macy’s has not disclosed spending on this omni-channel initiative, but it couldn’t have been cheap. One of the biggest costs had to have been implementing in-store hardware and software capable of handling both in-store and web sales. Companywide, 40,000 cash registers have been replaced with modern machines, capable of handling both types of transactions. Despite the cost, the company is thrilled with the outcome. “It’s a merchant’s dream. I don’t have to take a markdown, and I don’t have to build more warehouses,” says CEO Terry Lundgren.
Online sales account for only 10 percent of Macy’s total sales, but physical stores are more often than not fulfilling those orders. This fact draws a blurry line between in-store sales and online sales. But, when you think about it, isn’t that part of the point of omni-channel retailing — having all channels playing off one another and driving sales in other areas?