Recently I finished up my spring vendor user group blitz with Manhattan Associates’ Momentum conference. I am always impressed with the very pragmatic and yet highly strategic stuff that Manhattan’s customers are doing, particularly when it comes to the in-store side of cross-channel. Manhattan’s retail customers are doing some of the most sophisticated in-store things — and thinking about the more subtle and advanced aspects of in-store fulfillment — of any group of retail customers that I’ve seen.

Ship From Store

As one example, let’s take the economics of ship from store — using in-store inventory to fulfill orders that come from the web or other stores, but not just for in-store pickup, for actually shipping it from a store to a customer’s house. The simple math will tell you that in most instances, it looks like shipping from store is a losing proposition. Between the shipping and handling costs, not to mention finding the space in a store to make it happen, not to mention the way it messes with in-store inventory plans…As Manhattan itself puts it, $8 in margin goes out the window fast if it costs you $5 in store labor to pick and pack it and another $5 to ship it. You’re not going to make that up in volume. This is the argument going around today, mostly in the guise of conventional wisdom.

At RSR, we’ve taken the position that shipping from store is a no-brainer. Inventory is retail’s greatest line item expense, and not only do retailers need to be able to leverage inventory as a shared asset across the business in order to fully realize the value of that investment, their customers expect them to do it. How can we take such a contrarian position to the wisdom of the crowd?

There are two points in the argument that get lost. First, just because $10 is greater than $8 does not mean it is not economically viable to ship from store. It’s just not viable right now, given the way that the retailer is organized (or not organized) to fulfill from store. A better question is: what can we do to get that $10 cost down to $2? Or what conditions might exist that make it desirable for us to tap store inventory, given some of our constraints? At some point, it’s going to be cheaper to pull inventory from warm weather stores to send to colder weather stores, rather than mark it down in warm stores only to buy it again for cold stores.

Few retailers have this degree of insight into their business — let alone the flexibility to act on that insight. And yet, there are retailers that are examining exactly this degree of problem — how can I source my most at-risk-for-markdown inventory from stores to fulfill demand wherever it may occur — because it’s better to lose some margin by winning with a customer than by marking something down.

Second, once you get past the idea that shipping from store is a non-starter, you have to ask: are store associates the right people to be picking and packing? Small fashion specialty formats appear to be most vulnerable to this question because they have the leanest staffing models — there is a real opportunity cost to having one of a crew of two fulfilling outside orders. And bringing in a cheaper, non-customer-facing resource can seem like a labor investment with an uncertain return. But as retailers try to get more customer-focused, as they especially re-evaluate the role of the store associate in their strategy, I can easily see a world where customer service people in stores only help customers — and get paid more for it — while support functions get peeled off to lower-paid stockers and pickers. Makes the cost model for ship from store a little easier to bear.

Mobile In-Store Selling

But this isn’t the only tool in Manhattan’s shed. The company also demo’d their mobile store solutions. These aren’t brand-spanking new applications, but they are definitely newer to the list of retailers as an implementation priority. But this is the third in-store selling application that I’ve seen in about 3 weeks, and only one of them came from a self-professed Point of Sale company. So here’s the official warning claxon: traditional POS is under siege, and its future appears to be deteriorating faster than collateralized debt in 2008.

For a supply chain vendor like Manhattan, the real meat of a mobile customer service solution targeted to store associates is inventory visibility, order capture, and order promise. Adding pay to that is relatively easy (retailers will still have to put it through its PCI paces, no small thing). But as soon as you add pay, you have to ask, “How many traditional cash registers do I really need? “ Especially in specialty retail — one till to take cash, and suddenly you have more floor space, fewer opportunities for store associates to hide behind the counter, and a much cheaper device to deploy. You don’t have to be as out there as something like AisleBuyer to propose a future where the cash drawer (again, outside of high-volume grocery — and even that is under siege from the likes of ModivMedia) is much much less relevant to retail. All I can say is, ouch.