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Free Shipping Day: Warehouse Checklist for Success

BY CSA STAFF

By Maria Haggerty, president, Dotcom Distribution

More than 1,000 U.S. merchants will offer free shipping this Dec. 18 on all orders with guaranteed delivery by Christmas. Just six days before Christmas, free shipping day attracts troves of last-minute shoppers looking for a good deal and generated more than one billion dollars in online sales last year.

Free shipping day is a lucrative opportunity for retailers, but it’s not always smooth sailing, especially when dealing with complicated back-end logistics and warehouse management. There’s a great deal that goes on behind-the-scenes from the time a customer makes a transaction online until the package arrives at the doorstep.

Presentation Matters
As the last touch point in the customer experience, packaging and presentation plays a big role in post-purchase sentiment towards your brand and future loyalty. This presents a unique opportunity for retailers to win the hearts of new shoppers. But to transform first-time buyers into loyal customers year-round, you must provide an exceptional experience from start to finish.

Warehouse logistics and fulfillment preparedness can make or break retailers this holiday season. The best deliveries arrive on time, beautifully packaged and worthy of an Instagram post. However, poor packaging and late arrivals are prime targets for negative word of mouth – whether in person or across social media sites.

To give holiday shoppers a consistent, exceptional brand experience that translates to long-term increases in sales, make sure your warehouse, logistic and fulfillment operations are following a simple checklist for success.

Accurate Forecasting
Inaccurate forecasting is common and detrimental for warehouse processes, especially on peak days like free shipping day. When done properly, forecasting addresses a range of factors including scheduling, quality, staffing and delivery.

With just five short business days between free shipping day and Christmas, retailers are going to be facing an incredible time crunch. It will be critical to understand your daily processing capacity and transit time from your facility to the customer, which will play a significant role in determining the proper level of delivery service and ultimately your freight costs. For example, if your distribution facility is located on the east coast, you may need to leverage an expedited delivery method like three-day or two-day service for west coast orders. With ground service of four-five business days, you must have a clear plan in terms of how you manage outbound orders, processing those with the longest transit time first, or risk spending much more on freight than you may have budgeted. With freight being such a large expense, most retailers cannot afford to underestimate the impact of free shipping day on their holiday freight costs.

Effective forecasting models will identify expected order volumes on a daily basis. This allows you to schedule staff and ensure you have enough resources to meet demand. It may seem trivial, but running out of critical supplies like tape, scanners, carts, tows and anything else you need at each pack station can slow down processes and create bottlenecks that retailers may never recover from.

Increase Pick & Pack Station Efficiency
Warehouse pick and pack stations can’t automatically scale to accommodate huge spikes in order volume over the holidays. You must proactively find ways to improve efficiencies and increase capacity.

Adding another layer of complexity, demand for premium packaging, gift wrap and personalized messages spikes significantly in November and December. Since it would destroy your brand credibility to miss a delivery date (especially Christmas!), it’s crucial to lay the foundation so your warehouse can keep up with the added complexity and processes associated with gift packaging. Separate orders based on the type of packaging and any premium services required. Boxes should go to one station, wrapping paper to another, and personalized messaging at its own station.

Aside from gift packaging, identify other opportunities to pack orders through an alternative process and develop an optimized workflow for pick and pack stations. Consider reorganizing pack stations, creating mini assembly lines or other strategies such as “quick-pick” lines that support orders for only best-selling items.

Any opportunity to batch and pack orders more effectively will help reduce pressure and reliance on traditional pack stations. This will help your warehouse take advantage of process efficiencies and sufficiently manage a high volume of orders.

Hire and Train New Employees
One of the most pressing holiday challenges is finding skilled workers for your warehouse. Since you need to recruit, train, schedule and manage workers as cost-effectively as possible, ramp up hiring well before the holidays so you’re not scrambling to find employees when November rolls around. When you’re ready to hire your seasonal staff, ask for recommendations from your current workforce. This will help you find qualified candidates faster.

At Dotcom Distribution, we’ve found an effective onboarding process simplifies training and prepares new staff to be successful when they are out on their own on the warehouse floor. Train new hires then pair them with experienced warehouse staff for a half day before assigning them to their independent workstations. By matching them up with experienced staff, your new hires can learn processes and best practices firsthand, and have someone to go to when they have questions.

It’s important to treat seasonal employees the same way as your long-term staff. Set benchmarks and provide recognition for outstanding performance. Warehouse monitoring and performance incentives ensure the warehouse runs smoothly throughout the season. If things go well, you may need to hire some of your seasonal staff after the holidays to accommodate an uptick in long-term sales.

The holidays are always a busy time for retailers, but as the marketplace becomes increasingly competitive, it’s critical for brands to differentiate themselves by providing premium packaging and fulfillment. While this can be challenging for warehouses and logistics, especially on peak days like free shipping day, it’s worth it to take extra actions to maximize efficiencies and ensure consumers are receiving an outstanding customer experience every step of the way.

Maria Haggerty is president and founder of Dotcom Distribution. She can be reached at [email protected].


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Kirkland’s upbeat about ‘strong’ sales momentum

BY CSA STAFF

Kirkland’s plans to continue investing in its e-commerce business and anticipates executing a more aggressive approach to store growth, following strong third-quarter results.

The company reported net sales for the third quarter ended Nov. 2 of $106.1 million, a 9.8% increase from $96.7 million for the year-ago quarter. Comparable-store sales, including e-commerce sales, for the quarter increased 4.9% compared with a decrease of 4.7% in the year-ago quarter.

“Sales momentum was strong during the quarter as our fall and holiday seasonal merchandise performed well,” said president and CEO Robert Alderson. “We continued to see positive results from strong product margin, higher conversion and higher average ticket as our merchandise assortments are resonating well with customers. Traffic improved sequentially during the quarter, and early fourth quarter trends are similar. Our outlook for the fourth quarter remains upbeat, and we are optimistic about the further rollout of our branding initiatives as well as the introduction of our loyalty program, K Club.”

Kirkland’s opened 9 stores and closed 3 during the third quarter of fiscal 2013, bringing the total number of stores to 323 at quarter end.

As it heads into fiscal 2014, the company plans to continue building on its momentum with growth in sales, margin improvement, the execution of multichannel strategies and further investments in branding and e-commerce.

“We currently anticipate that our square footage growth will be at least 10% in the coming year. This early outlook reflects the intense foundational work we’ve done over the last three years, which has us well-positioned to grow the business,” added Alderson.

Based on its strong sales and earnings performance, the company has increased its full-year earnings range to $0.90 to 0.95 per diluted share from its previous range of $0.80 to $0.90 per diluted share.

For the fourth quarter, the company expects to open 8 stores and close 7 stores. For fiscal 2013, this represents 24 new store openings and 23 closings, a square footage increase of 3%.

The company expects total sales for the fourth quarter to range between $159 and $162 million. This implies a comparable store sales increase of 2 to 4%, when using a 13-week to 13-week comparison.

Kirkland’s was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the company has grown beyond that region and currently operates 324 stores in 35 states.

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Price Check for Centers

BY Jeff Green

Here’s something you may not have heard in a while: Competition from multiple buyers is causing a spike in the price of many shopping centers. This isn’t a minor bubble, either — it has become apparent to me that the extremely competitive nature of the current market has led to some dramatic overpricing. From my perspective, many of the price tags on power centers and grocery-anchored neighborhood centers (and, to a lesser extent, traditional malls and unanchored strip centers) are getting out of touch with reality.

This point was driven home to be recently by an experience I had when performing some due diligence research on behalf of a client interested in investing in a major distressed power center. After looking closer at the property, the tenants, the market and the financials, I ultimately advised the client in no uncertain terms to stay away. I believe the phrase I used was “I wouldn’t touch that with a ten-foot pole.” To my disbelief, I later discovered that the property had 17 competitive bids! In this case, the center is a distressed asset that was built before its time — developed in anticipation of population growth that never materialized. This demographic reality shows no sign of changing anytime soon.

So what’s going on here, exactly? I’m sure that part of it is that there are plenty of prospective buyers out there, including REITs, pension funds, insurance companies and developers. And, with a recovering economy, there is a significant amount of investor money sitting on the sidelines. Mostly, however, it’s a case of a lack of product: there are simply fewer opportunities to invest in new development because there is no new development. At least, new development has slowed considerably in the past few years. The result is that prices for many properties are inflated at the moment.

Also, the success of some redevelopment initiatives has investors assuming that many less-than-desirable centers will be redeveloped or rehabilitated. The reality is quite different, however. Yes, there are high-quality redevelopment opportunities out there, but not every center is a candidate for redevelopment. You still need the basic ingredients for retail success, and not all of those can be controlled. You can shuffle the tenant mix and invest in significant upgrades and new construction, but if the market isn’t there, you are still going to be paddling against the current.

With all of this money out there and no one quite knowing where to put it, the net result is that everyone is chasing the same kind of asset: neighborhood grocery-anchored centers and power centers where investors and developers believe they can add value. The supermarket-anchored neighborhood centers seem like the most active category, with generally the most intense competition over the center(s) in each market with the strongest supermarket brand (either the best sales volumes in the region or the top market share). Power centers, however, are the category of commercial asset where I find the inflated prices to be the most puzzling. There simply are not very many new tenants appearing in this category (with a few exceptions like Sprouts and Total Wine) and, because there are so many current vacancies, the prices are lower.

If I were putting my money down, today, I would try and think very carefully about two things: 1) where I could add the most value, and, 2) where the prices are more realistic. There is nothing earth-shattering about that, of course, it simply goes back to investment basics. Realistic prices are a little difficult to find, these days, however. Maybe the best approach in the current environment would be to focus somewhere where most of the REITs are not looking: the anchorless strip centers. They may not be the “sexiest” of investments, but they make great money if they are positioned correctly, with popular fast-casual and quick serve restaurants as well as professional services such as some of the new massage, chiropractic and medical/dental concepts out there. It’s a much better position than overpaying for one of the other categories.

From a retailer perspective, I’d be a little bit worried that landlords might be asking rents that are beyond what’s affordable. Especially because many retailers are still out there looking for deals, we are starting to see a disconnect between what investors are expecting and what kind of rents retailers are willing to pay. This will be worth watching closely over the next year or two.

The bottom line is this: There is disproportionate investment interest in many commercial development categories at the moment, especially relative to the earning power of those assets. Is that a blip on the radar screen or a trend that will persist going forward? I’d love to hear your thoughts and personal experiences: Is the market out of alignment? If so, what kinds of developments are seeing the highest price spikes? Join the conversation by leaving your comments below or emailing me at [email protected].


Click here for past columns by Jeff Green.

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