Why Are More Retailers Turning to In-Store Microfulfillment?

As many retail brands face pressure from customers’ increasing expectations, company leaders have frequently turned to retail microfulfillment as a possible solution. This strategy has traditionally involved taking one of several approaches.

The first method involves placing a microfulfillment center (MFC) in a separate building attached to or on the same property as an existing retail store. Another option is for the retailer to use a facility solely for order fulfillment. These are so-called “dark stores” because no customers enter them.

Finally, the third possibility is to pursue in-store microfulfillment. That option involves dedicating a part of a physical store to order completion processes. Here’s why retailers increasingly find that the third approach makes sense.

Many Customers Prefer In-Store Pickup to Deliveries

There’s no question that home deliveries are the most convenient option for many customers. Obligations at home or work and a lack of reliable transportation are some of the many things that could make it hard for some people to pick up their ordered items from physical stores.

However, some people don’t mind — and often prefer — to retrieve their goods from physical stores. That was one of the main takeaways from a 2023 study by PYMNTS/Cybersource. More specifically, there was a 26% increase in people who used in-store pickup options in 2022 versus 2021.

Additionally, in-store pickup options were most popular with consumers in the United States, with 37% more shoppers in that country saying they used in-store or curbside pickup options for their most recent purchase versus in 2021.

Creating Customer Convenience and Sales Opportunities

Another reason companies prioritize retail microfulfillment in an existing store is that many customers will already be familiar with the location. They can plan to stop in and pick up their orders on the way home from work or in another way that fits with their schedules.

Encouraging people to come to stores to pick up their purchases also creates opportunities for additional sales. Some retailers have lockers from which people can retrieve their purchased goods. However, an option that typically requires less new infrastructure is installing a service desk for people to use when picking up their items. Alternatively, retailers could use half of an existing area — such as one currently reserved for customer returns — to handle microfulfillment requirements.

Another possibility is to have an item pickup point at the center of a store and use visual indicators like signs and floor stickers to direct people to the right place. The main benefit of putting the pickup location somewhere further away from the entrance is that people must spend slightly more time in the store and walk through displayed merchandise while doing it.

Both of these factors increase the chances of people making unplanned purchases when going to get the things they already ordered. More time in a physical store also creates opportunities for people to form positive associations with the location. Whether they respond favorably to the lighting, store layout or something else, that reaction raises the likelihood of them shopping somewhere again.

In-Store Retail Microfulfillment Prevents Sourcing Additional Locations

Setting up a microfulfillment center separate from an existing retail outlet is not always an option. That’s particularly true of stores operating in high-rent areas or those lacking sufficiently large vacant properties. So, it’s no surprise that disused shopping malls have become popular places for microfulfillment centers.

However, setting up such a facility in a fully operational store the retailer already owns is even better. Then, there’s no need to look for or budget for additional locations. Instead, store decision makers can repurpose a part of a physical store to meet microfulfillment needs. An IKEA store in Croatia took that approach in a highly automated facility within the retail building.

The system contains 2,900 products, all weighing less than 30 kilograms. Statistics suggest this new setup, which includes several robots, should significantly increase worker productivity. Before this technological implementation, a worker typically filled 20 order lines per hour and walked about 1 kilometer. However, estimates suggest someone could handle 170 more order lines hourly now.

Additionally, this retail microfulfillment solution lets customers use click and collect or home delivery. The associated expected benefits include lower transportation costs and faster order-filling times. Last-mile delivery is the most complex and time-consuming stage of the fulfillment process. Although it represents the final phase and a time when delivered goods are closest to those who bought them, numerous complications can arise.

A delivery driver may encounter road construction or heavy traffic, making them fall outside of a significant portion of the day’s parcel time frame estimates. However, retail microfulfillment avoids some or all of those problems. An MFC places goods closer to the consumers who eventually receive them, reducing delivery-centric complications. However, if shoppers go to stores to pick up their goods, retailers don’t need to worry about last-mile delivery issues.

The Existing Labor Force Can Assist with Order Fulfillment

Another major perk of in-store microfulfillment centers is that retailers don’t necessarily need to hire new employees to work in them. Instead, they could upskill the current workers, teaching them what they need to know to become valuable fulfillment team members.

That strategy is critical, considering many retailers have trouble finding enough workers. The results of a 2023 survey from Fourth indicated 87% of retail leaders have talent-related concerns this year. Additionally, 94% of retail workers worried about how such shortages would impact their roles. Those two statistics highlight how employers should strongly consider pay raises to make it more attractive for employees to learn microfulfillment skills.

Using in-store workers to help with fulfillment is already becoming popular. In one case, New England retailer Big Y Foods has workers select perishable items from a physical store. Then, an adjacent MFC handles other kinds of products that customers request.

While this case is not an example of purely in-store retail microfulfillment, it illustrates how store employees can contribute to the necessary teamwork to finish people’s orders faster. A Big Y executive explained this approach reduces how far workers must walk. However, having them get perishable items ensures customers receive the freshest things possible and more efficiently.

Elsewhere, BJ’s Wholesale Club employees handle in-store picking of items delivered to customers by a third party. This method reportedly results in shoppers getting items with the longest possible shelf lives and receiving more accurate orders that offer appropriate substitutions when necessary.

Retail Microfulfillment Matters for Brands’ Diversification

The ways that consumers buy goods have drastically changed over the past several years. Now, many people are less likely to self-select their products from physical stores, but they remain open to choosing those options online and picking them up later or having the chosen items delivered.

The above in-store retail microfulfillment themes highlight why so many brand executives are exploring ways to implement them. Doing so can and should happen slowly. However, when retailers want to keep pace with how modern consumers want to shop, in-store microfulfillment is increasingly an essential element.