PFSweb Inc. has been acquired in a deal valued at $181 million by GXO Logistics Inc.

PFSweb provides business-to-business and direct-to-consumer order fulfillment and customer service for ecommerce. GXO is a global contract logistics company that manages outsourced supply chains and warehousing. The company generates about $13.3 billion in annual revenue. It’s acquiring PFSweb for its expertise and client base in ecommerce shipping and fulfillment.

GXO acquires PFSweb

“PFS is an ideal acquisition for GXO (because) it enhances our exposure to new high-growth verticals in North America and adds important capabilities to our offerings,” says GXO CEO Malcolm Wilson. “Over the past 25 years, the PFS team has established a successful track record in both direct to consumer and B2B channels, and they’ve built a rock-solid reputation with many of the world’s most iconic brands by deploying an order fulfillment platform that rivals the largest enterprise 3PL providers in the industry.”

Headquartered in Irving, TX, PFSweb offers diverse ecommerce services including, among others:

• Order fulfillment
• Order management
• Customer service
• Payment services
• Fraud prevention

PFSweb provides services to about 100 retailers and manufacturers. Last year, it generated revenue of about $295 million.

Customers include:

• L’Oréal USA
• Champion
• Pandora
• Shiseido Americas
• Kendra Scott
• The United States Mint

“GXO’s industry leadership, global scale and significant capital resources make their platform a strong strategic partner for PFS,” says PFSweb CEO Mike Willoughby. “In joining GXO, we can deliver our proven, branded order fulfillment and support services to an expanded base of premier clients, as well as further enhance GXO’s global fulfillment network. The GXO team shares our commitment to top-quality client relationships and execution, and we look forward to our future together.”

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Matt Mullenax, co-founder and CEO, Huron

The result? “It’s probably saved us five-times the time and double the price savings,” he says.

By automating accounting tasks, Mullenax says he was able to “give time back to the team — time is what we’re constantly fighting for.” Huron migrated to bookkeeping software vendor Finaloop for tasks like creating financial reports due at the end of the month, which are essential for the brand’s investors, he says.

How small and medium retailers can leverage AI

Previously, the brand relied on consultants to help it process financial information.

“Even with consultants who knew our brand well and knew what we were spending, there was the inevitable back and forth each month,” he says.

The brand has investors to report to, Mullenax says.

“We’re sending out monthly updates, and it’s important that we send those out as quickly as possible,” he says. “We’re able to communicate with our investors earlier, and that’s important for us.”

Finaloop provides ecommerce bookkeeping integrations for issuing invoices, billing and other administrative tasks. Balance sheets and cash flow, are kept in real time. The software also helps ecommerce brands manage inventory by combining a brand’s accounting system with inventory management, says Finaloop founder and CEO Lioran Pinchevski.

Brands must understand what each sale costs by considering expenses like the cost to produce a product, which can include merchant fees, marketing and shipping expenses, he says.

“When you run [marketing] campaigns, for example, the one thing you want to know is your contribution margin. That will dictate whether the next dollar you spend on advertising is actually making you money, or losing you money, which is very important,” Pinchevski says.

Finaloop allows Huron to keep track of revenue from multiple sales streams, which include its Amazon store. Amazon.com Inc. is an important revenue source for Huron, Mullenax says. Like other small- to medium-sized retailers, Amazon became a reliable place to sell during the height of the pandemic. Consumers continue to shop for Huron products in the retailer’s Amazon store.

Customers buy differently on Amazon versus direct-to-consumer websites

Buying behavior tends to be very different depending on if a consumer is shopping through Amazon.com or through usehuron.com, Mullenax says.

“It’s pretty rare that you get a customer who is a subscriber or multi-time purchaser on usehuron.com that then reverts back to jumping on Amazon to buy [a single item],” he says.

Customers spend differently as well, he says.

“Our average order value is much higher on usehuron.com compared with Amazon,” Mullenax says, without revealing more. “But the conversion rate on Amazon is much stronger than it is on our direct-to-consumer website.”

Huron uses Shopify to run its direct-to-consumer website. The commerce platform provides metrics that indicate Huron’s conversion rate in the beauty category is strong, he says.

Amazon performs differently, he says.

“On Amazon, it is busy [for us] during busy times or peak seasons, where we’ve seen really strong conversions,” Mullenax says.

This includes periods like Amazon Prime Days. In July 2023, the brand did not offer any discounts on its Amazon store, but it still experienced an increase in sales during the two-day event, he says.

“We had a fantastic Prime Day in 2023,” he says. “Our performance basically doubled year over year, and we didn’t participate in Prime Day discounts.”

Mullenax says he attributes much of this success to the brand’s “strong organic rankings mixed with really good customer reviews on Amazon,” he says.

How SMBs can upsell without turning off customers

While sales on Amazon remain steady, online sales on its direct-to-consumer website are growing stronger, he says.

“One of the things we’ve found interesting on our own website is as we’ve continued to release products and build our assortment, our AOV has basically doubled in Q1 2023 compared with the year before on usehuron.com,” Mullenax says.

He attributes part of that boost to launching new products and charging slightly higher price points, he says.

“And we’ve also had a maniacal focus on what happens in the cart,” he adds. This includes strategic upselling.

“How do we introduce new products to the customer that he or she might not otherwise explore?” he says. “And how do we position those accordingly?”

One tool Huron uses is Shopify’s plugin Rebuy. It appears during checkout and suggests related products. Within a 90-day period between April-July 2023, customers purchased suggested related products through Rebuy 25% more compared to the four years the brand has been in business, he says.

“And over the last six months, when pressed with an opportunity [a consumer is presented with alternative products to purchase], 30% of customers are choosing to add a product to an existing order,” he says.

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The 2023 Chargeback Field Report is now available as a free, no-obligation download. It offers a realistic overview that explores the evolution and growth of chargebacks and steps merchants are taking to protect their businesses.

Compliments of Chargebacks911

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I couldn’t help but think, so what is to become of stores.

In talking to friends, some seem to be having the same experience. They share that “stores are frustrating and that there’s no one to help me get what they want. “On the contrary, the small local stores like Ace Hardware are good as the staff knows the merchandise.”

She shares that she was at REI looking for swim shirts and got lost in the store. “The only person I saw working was at the cash wrap, and even that associate said she couldn’t find people either. Ultimately, she radioed for help. Deep down, I don’t feel like they want to help and that is a concern.”

In some stores, there appear to be more shoppers than staff. That was certainly the case on June 19th, when I visited a Chicago-area Costco at 11 a.m. The store was packed, and the self-checkout line was at least 20 deep. That’s to be expected on a Saturday, maybe, but not a Monday, even if it was Juneteenth.

Shoppers wait in long lines for self-checkout at Costco                          

Stores are staff-challenged

In many ways, this “register closed” sign at Zara’s Old Orchard summed up what was sure to be a “frustrating” summer – and not just for shoppers, but for store associates too. Maybe one could suggest highlighting the one that was open where at least 15 customers waited to cash out.

One of six closed registers at suburban Chicagoland Zara                                                                                      

Signs of staffing shortages

The stores all seemed to have “help wanted” signs visible on most windows I passed by. Upon entering my favorite Home Depot, prominent signage caught my attention and suggested methods retailers are using in hopes of bolstering their staffs.

Hiring sign at Chicago Home Depot

The many faces of store staffing

One friend who spent her entire career in retail and wholesale positions, talked about her part-time job at The Loft. “When I started, there wasn’t enough help, and it wasn’t for a lack of trying,” she said. “Now, we have a bunch of kids working for the summer so there’s much better coverage.”

“People really want to look on their own, so the notion of a ‘salesperson’ is probably an outdated term,” she said. “I work near the fitting room and will often say to customers trying on clothes, ‘let me know if I can help or offer an opinion’ and many people take me up on it. And interestingly, as they leave the store, they often say things like, ‘thanks for helping me’ and I’m a little surprised,” she said. “On a personal note, I feel like in specialty stores I’m being approached more than was the case six or eight months ago.”

This feedback on big box also supports that notion, “I would say it feels like there is more help. Recently, I’ve only gone to Home Depot and Target, and I’ve been able to easily find people to whom I can ask complex questions (Home Depot) or efficiently do my shopping with returns, etc.,” another friend said.

Another general response about the level of help in stores was interesting. “We went to Target to look for a bike, and our family of five split up to find a sales associate. We did find someone in the end. But this was during the week…maybe they are better staffed on the weekends,” the respondent said. “Walgreens seems to have more people around to unlock things. Free People, Anthropologie, Crate and Barrel and Sephora in Old Orchard had plenty of help. Zara was still spotty,” they said of the Chicago area shopping center.

35 retail visits reveal the real results

This prompted me to put together an ad hoc study of stores and their frontline employees. In the end, I broke the story into big box (10) and specialty stores (25), given the nature of their footprint, how they present themselves and their unique challenges.

This would give me a chance to sample many types of stores to see first-hand what the state of retail help was today. For example, Target city stores are much smaller than others near me, so in those instances I tested both. I also tested both urban and suburban mall-based locations.

I would walk through each store and count roughly the number of people working on the floor. They were delineated by associates, stock people and cashiers. More specialized employees like a framer at Michaels or a pharmacist at Walgreens were counted separately, but in the end categorized as an associate. With ongoing reports of retail crime, I also noted if there was a security person present.

The big box experience

Big box stores seem like warehouses, they are cavernous. Customers often appear to be managing their own experiences. The store associate often assumes a secondary role, with stockers and cashiers more visible. A self-service mindset prevails.

Specialty store dynamics

Generally speaking, the specialty store experience remains intact. Many of the stores have small footprints, so they don’t require significant staffing to cover the floor. Stock is ample. One positive encounter with a sales associate is all it takes to establish a relationship.

Of the 10 big box retailers stores and 25 specialty shops I visited, they averaged 9.56 and 2.44 associates per store respectively. Surprisingly, in 80% of those large format stores, I was even greeted,retail while 72% of specialty stores connected with me upon arrival.

Perhaps we can all learn from Apple. My visit to their suburban location on a recent afternoon was an experience where I was warmly greeted and at least twenty people were working with associates.

In larger stores, retailers seem to focus on getting products on the shelf. This Target photo reflects their essential role as I peruse the many aisles.

Stockers have a strong presence at Target stores

The good news is that stock levels in the stores I visited were good at both the big box and specialty locations.

Though Target is mostly seen as a category killer or big box, I included my visit to their city store as part of the specialty store group. Of course, they had self-service in both. Cashiers were prominent, with an average of 5.33 in big box stores contrasted with 1.36 in specialty stores as they often roam the store rather than assume a fixed position.

And speaking of self-service, in the case of Lowe’s, this associate appears to stand guard at the self-checkout stations. 44% of big box stores and just the city Target location embracing self-checkout, with six stations from a specialty perspective.

Associates man self-checkout counters at Lowe’s.

Lock it up

With retail crime a force to be reckoned with, shoppers encounter the unpleasant reality of products that are locked up. I clearly remember six months ago when my daughter called from her preferred Target in Brooklyn to say so many of the products were under lock and key. It’s shocking, but a reality in today’s world.

It’s no wonder shoppers are given the option to press for customer service. Despite a lack of associates, this is the shopper’s only chance for service and hopefully satisfaction.

Customers must ring the bell for assistance at Walgreens

Security plays a heightened role for staff

Being alone in a store is no longer safe, and it’s not smart business. From my daughter, who works at a designer store in the Boerum Hill Brooklyn neighborhood, “We’re so understaffed. It’s just me and my manager, and she has to handle inventory issues downstairs. On a weekend like Father’s Day, a lot of people are out and about, so it’s busy,” she said.

“I feel nervous about being alone, and I told my manager this. It’s nerve wracking, you don’t know how people are going to behave. We have no security cameras, and we need a Ring system.”

If you’re her mother, the most candid and telling line was “It’s frustrating as we are paid to be sales associates not security guards.”

The mobile device has changed the store experience

Mobile devices are changing physical stores, and I don’t mean being able to look up a QR code or pick up an order curbside. In the past, shoppers used to enjoy visiting with store associates. At one Free People store in my neighborhood, a store associate let me know that she enjoyed interacting with customers, but says the customer is no longer interested in most instances. Chalk that up to the mobile phone, as the world only seems to be interested in interacting with their devices. It’s a missed opportunity for all.

Every man for himself

We all live in a world where we now must act as our own store associates, and certainly our own advocates. As individuals, we must put ourselves in a position to find products, know how they work, be able to research online prior to a store visit and in some cases check ourselves out.

Investments in self-service

As I was going through this exercise, I couldn’t help but think that younger people might expect and accept more of a self-service environment. I for one don’t always need help, but I do appreciate the option.

To address staffing issues, retailers have embraced self-service in different ways. For The Home Depot, it might be pickup lockers following in the footsteps of UPS and Amazon. These make it simple for shoppers to pick up their orders with no associate interaction.

Order pick up lockers at Home Depot

Stores reconfigured for the times

The premise of this article asked the question: “will today’s store experience drive more shoppers online?”. I think it’s a mixed bag, and circumstances dictate results, as the chart below suggests.

I thought it would be insightful to share the results of two 2023 Digital Commerce 360 surveys about when shoppers choose to go to a physical store. It serves as a perfect segue into my channel decision model.

The post Do staffing shortages at stores play into the digital hand? appeared first on Digital Commerce 360.

But instead of planes, Ameriflight wants to use drones for what it says are “health care and ecommerce deliveries to customers located in dense urban and suburban environments across the country.”

The company, which has about 156 planes in its fleet along with 14 bases, 1,500 weekly departures, and 200 destinations, says it has received permission from the Federal Aviation Administration (FAA) to operate drone aircraft.

Ameriflight, a commercial air carrier in business since 1968, will partner with Matternet, a developer of a large urban drone delivery system, to build a drone delivery network.

Ameriflight ecommerce

Key details such as how many drones will be deployed and where and how quickly the drone fleet will scale are still unclear. But what is clear are the combined operation’s target markets: healthcare and ecommerce.

“The approval to add drones to our operation positions Ameriflight, once again, at the forefront of innovation in the aviation industry,” says owner and chair Jim Martell. “Moving forward with the future of our newly operative UAS division allows us to expand into a largely untapped delivery market with a lot of room for speed and safety logistic improvements.”

In 2019, Matternet and UPS partnered to launch drone delivery services in the U.S and in 2022, Matternet’s M2 drone became the first drone delivery system to achieve Certification by the FAA in the U.S.

Ameriflight will deploy the M2 fleet of drones using Matternet’s software platform from a central remote network operations center. Ameriflight also intends to operate its uncrewed aircraft as a supplement to its crewed operations and not replace its current flying operation, aircraft, or pilots.

“This is not a test program or a future deployment concept — this is the real, scalable, and safe drone-based solution that customers are looking for,” says Matternet CEO Andreas Raptopoulos.

Ameriflght, which says it delivers 75,000 packages daily, has yet to announce pricing or delivery routes and times. But commercial ecommerce deliveries are a top priority. “Drone delivery can enable ultra-fast delivery of small packages,” the company says.

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As if a possible recession and declining consumer sentiment wasn’t enough to worry about, retail executives are struggling with increasing amounts of stock disappearing, or shrink in industry parlance. The problem was talked about more on retailer’s earnings calls this quarter than any quarter on record, according to transcript data compiled by Bloomberg. The nearly 200 mentions mark a quarter-on-quarter doubling.

“The increased attention is basically due to more large retailers calling out shrink as a real problem impacting both sales and margins,” Evercore ISI analyst Greg Melich said in an interview. Shrink can also refer to things like damage and expired stock, but theft is the main component.

“Shrink levels are increasing for almost all retailers, Michael Relich told Digital Commerce 360. Relich is co-CEO of apparel brand Pacific Sunwear of California Inc., better known as PacSun.

The shoplifting losses are beginning to reach staggering levels. Target Corp. said lost or stolen inventory will hurt profitability by $500 million this year,

Target ranks No. 5 in the Top 1000 database, Digital Commerce 360’s ranking of the largest North American online retailers by web sales. PacSun is No. 239.

And it’s not just inventory costs at stake. If retail theft worsens it could start to deter shoppers from brick-and-mortar stores and shift consumption online, where margins are often lower, Melich said.

Earlier this year, the National Retail Federation calculated that lost inventory cost retailers nearly $94.5 billion in 2021, up from $90.8 billion the prior year.

Shoplifting and online marketplaces

The prevalence of online marketplaces and the ease at which they allow thieves to sell stolen goods are partly to blame for the increase in retail theft, Melich said. They have helped proliferate a de facto industry out of criminal shoplifters, he said.

Retailers are fighting back with various tactics from locking merchandise behind plastic windows to even exploring speed-limiters on shopping carts. But many say they are largely powerless. Walmart Inc., the world’s largest retailer, said although it’s “actively managing” the problem, it believes only law enforcement can provide a lasting solution.

That assertion is hard to prove, however, as conclusive data is difficult to come by. Violent crime overall was on the rise in the U.S. prior to the pandemic. But property crimes had been steadily declining over that period, according to data from the Federal Bureau of Investigation. Some studies suggest the pandemic brought about a spike in street crime.

And while New York City, “the epicenter of the retail market” in the U.S. according to Mayor Eric Adams, saw a 45% increase in retail theft complaints in 2022, reports of shoplifting fell in California. However, that may be have been partially driven by a new law decriminalizing thefts below $950 in value.

Growth in media coverage of crime may also be contributing to the increase in executives talking about shrink. News stories that mention theft have steadily increased since the start of the pandemic. They reached a peak in May, according to a search of about 150,000 online sources by Bloomberg.

Whatever the cause, it remains to be seen how much control retailers have. TJX Co. chief financial officer John Klinger said he is “laser focused” on fighting theft, but he isn’t expecting any improvement in shrink losses this year.

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The goal is to increase its inventory accuracy, which would reduce split shipments, co-CEO Michael Relich told Digital Commerce 360 at the Manhattan Associates Inc. Momentum 2023 conference in May in Phoenix.

The retailer wants to reduce its split shipment rate, which is when an ecommerce order with more than one product ships in multiple packages. This is especially prevalent when retail chains ship online orders from stores and distribution centers. PacSun recently launched ship-from-store from its 315 stores in 2020 and seeks to reduce its split shipment rate.

Relich cites average industry data he’s seen through his tenure as store inventory being 70% accurate and average omnichannel retailers shipping 1.5 packages per every order.

With PacSun having an average order of 2.1 units per transactions, and store fulfilling roughly 20% of orders, its split shipments were high, he said without revealing the rate. Fulfillment vendor Narvar Inc. reports that 21% of orders from an online retailer arrive in more than one shipment, according to data from collected October-December 2021.

Store inventory inaccuracies lead to split shipments

For example, if a store’s inventory accuracy is only in the 70% range, the order management system could allocate an ecommerce order to a store to fulfill. But with inaccurate inventory, there is a chance the store doesn’t have the entire order, so the store will fulfill some of it, reject the other part of the order and the system will select the next-best store location to fulfill the rest of the order. This results in a split shipment.

“If we can get down to almost zero split shipments that would be huge,” Relich said.

Split shipments are not only a bad experience for the shopper, who wants to receive their order all at once, this costs the merchant.

“Parcel rates have almost doubled in the past two years, so split shipments end up costing you quite a bit,” Relich said.

With RFID, store inventory accuracy can improve to be more than 97-98% accurate, said Amy Tennent, senior director of product development at Manhattan Associates. This is a large jump from the average, which Tennent said is around 65-70% accurate.

PacSun is currently implementing Manhattan Associate’s Point of Sale system, which will go live in 2024. The POS works with the Manhattan RFID system, but because it is not yet live with that system, PacSun is piloting the effectiveness of RFID with a different vendor, Relich said without disclosing that vendor.

More frequent inventory counts with RFID

With RFID, PacSun plans to do an inventory count of the store a few times a week, which should take 20 minutes each. This is much more frequent than conducting an inventory count a few times a year, which is what it does now, he said.

Michael Relich, Co-CEO, PacSun

With just twice a year, a store’s inventory count could be off by 500 units per store, making it hard to determine what happened, Relich said. With frequent counts, a store manager or PacSun management can find out a store is suddenly down 100 units. The manager can then look into why, such as if it didn’t receive a scheduled shipment earlier that week, or if the shipment was missing a box. This will hopefully allow the brand to find and rectify inaccuracies faster.

Tennent said RFID is getting more popular within the retail industry as costs of RFID tags and chips have decreased to just a few cents, compared with 80 cents to more than a $1 a few years go. Plus, a number of brand manufacturers, such as Levi’s Strauss and Co., are already embedding RFID in their products, which eliminates this cost and step for retailers that carry those brands and want to implement RFID.

At Manhattan Associates, it announced one of its software now has an RFID integration with Zebra hardware devices. From 2019-2021, only about one or two of Manhattan’s customers have piloted and used RFID. But today, around 18 customers are looking into launching the technology, Tennent said without providing details.

RFID could help theft

“Now with omnichannel, you have buy online, pick up in store, you have buy online, ship from store, you have local delivery,” Relich said. “And then the shrink issue, which has increased for every retailer. So, the ROI on RFID has changed.”

“What omnichannel has done, it’s really pushed the need for inventory accuracy,” Relich added.

Shrink is the retail industry term for loss of inventory, which includes theft from external criminals, employee theft, procedural errors, such as forgetting to scan in an item, and shipment errors, such as not receiving the correct inventory from the carrier.

Theft is another reason stores may have an inaccurate inventory count, which also could lead to split shipments, Relich said. If the system thinks the store has a certain item, it will allocate an order for that store, but if a criminal stole that item, PacSun can’t fulfill the entire order and the order will split.

“Shrink levels are increasing for almost all retailers,” Relich said.

Eliminating safety stock on the commerce site

More accurate inventory at the store level eliminates the need for safety stock, or stock a merchant doesn’t expose online in case it does get an online order for a product.

PacSun, however, has never used safety stock because it never buys deeply on any one of its fashion products.

“If I put a safety stock of one in my store, that would pull 500,000 units off the website,” Relich said.

Plus, PacSun wants to expose as much inventory as possible online. Even if a product is no longer available in a distribution center or the product is in various sizes spread across its store network, it’s advantageous for the retailer to sell that product online at full price rather than marking it down at store.

“If I walk into a store and I see a top all by itself, you expect to get a discount, because who wants it?” Relich said. “But online, I have that top in 300 stores, so I have full assortment. So it enables us to sell the goods at a much higher margin.”

PacSun is No. 239 in the 2023 Digital Commerce 360 Top 1000.

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“We got the team together and I said, ‘We’re going to roll out ship-from-store and we’re going to go live in a week,’” co-CEO Michael Relich told Digital Commerce 360 at the Manhattan Associates Inc. Momentum 2023 conference in May in Phoenix.

PacSun’s two week ship-from-store roll out

PacSun was already in the process of implementing Manhattan Associate Inc’s. Active Omni order management software in the PacSun brand and with its other apparel brand, Eddie Bauer. But it was still months from fully rolling it out.

The merchant trained its employees over the video conference platform Zoom, piloted the program at 50 stores, and went live across PacSun’s 315 and Eddie Bauer’s 200 stores in two weeks — still in March 2020, Relich said. PacSun sold Eddie Bauer to SPARC Group in May 2021.

Despite pandemic restrictions closing malls, PacSun sent a store manager to pack online orders to its mall-based stores to meet social distancing rules. In markets with multiple stores, the employee would go to one store in the morning to pack orders allocated toward that store, and the next store in the afternoon.

The next hurdle was getting its shipping carrier FedEx Inc. to pick up its packages. In many markets, the carrier no longer made stops at the closed malls. And so, store managers packed up garbage bags full of ecommerce orders in their cars to drop off at their local FedEx, Relich said.

Despite the scrappiness, the system worked. PacSun and Eddie Bauer stores fulfilled roughly 40,000 orders a day at the peak of stay-at-home orders in Q1 and Q2 of 2020, Relich said.

“I would not be exaggerating to say it saved the company,” he said.

With ecommerce volume spiking — Digital Commerce 360 estimates PacSun’s online sales grew 46% in 2020 compared with 2019 – the closed stores went from fulfilling no orders to roughly 80% of all its orders during the peak of the pandemic, Relich said. However, this varied based on staffing levels at the warehouse.

Distribution center employees

Michael Relich, Co-CEO, PacSun

Even though PacSun feared regulations would force its one distribution center to close, it remained open. The real struggle, however, was finding employees willing to come in. The picking, packing and shipping process often meant employees working close together, which didn’t align with pandemic protocols.

Besides fulfilling ecommerce orders, warehouse employees receive goods, process returns, put away goods and warehouse maintenance. Staffing should have been around 450 employees at the warehouse, but PacSun would have been lucky to have had 150 employees to show up, Relich said. Plus, if an employee got COVID-19, that would take out about half the department as many employees would have been exposed to the virus, he said.

Because of this, PacSun shipped the majority of its orders from its stores. When PacSun’s stores reopened that summer, most of them were cleared of merchandise and ready to receive and sell the new season’s merchandise. Because its stores did not need to clearance nonmoving inventory to make room for new styles, the brand drove some of the highest margins in company history, Relich said.

PacSun fine tunes the Manhattan order management system

Even though the new Manhattan Active Omni system was working well during an unprecedented time, PacSun knew it could unlock more of the features than just the basic ones.

“I’ve used other order management systems, but [the Manhattan] order management system is extremely sophisticated. But with sophistication comes complexity,” Relich said. “While we made it work, we started looking at shipping costs. And during the time, we really didn’t care, just get it out.”

The retailer targeted reducing its split shipment rates, which is when an ecommerce order with more than one product ships in multiple packages. With shipping orders from stores, split shipments were higher than normal as store inventory is often inaccurate. Relich cites average industry data he’s seen through his tenure as store inventory being 70% accurate and average omnichannel retailers shipping 1.5 packages per every order.

With PacSun having an average order of 2.1 units per transactions and stores fulfilling many orders, its split shipments were high, he said without revealing the rate. Fulfillment vendor Narvar Inc. reports that 21% of orders from an online retailer arrive in more than one shipment, according to data from collected October-December 2021.

Split shipments are not only a bad experience for the shopper, who wants to receive her order all at once. But this also costs the merchant.

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Analysis of omnichannel trends in today’s evolving retail world. Includes over 25 charts, data on the Top U.S. retail chains, consumer survey results on omnichannel shopping habits, and new developments in the race to fulfill online orders.

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“Parcel rates have almost doubled in the past two years, so split shipments end up costing you quite a bit,” Relich said.

Reduced split shipments would also help its brand when it comes to sustainability, Relich said.

“Nothing bothers me more than to see two boxes of corrugate, and I’m looking at that waste, and then I think they were on a truck, and how much carbon was emitted,” he said.

Reducing split shipment with loads of data

PacSun started working with demand forecasting vendor Antuit.ai. Retail hardware vendor Zebra Technologies Corp. owns Antuit.ai. Antuit gave the vendor its online sales data by ZIP code and sales demand and sell-through at stores in that area. This helped look at the stores like mini fulfillment centers. It also helped determine how much additional inventory the brand should allocate to stores.

This way, if the order management system selects a store to fill an order, the store should have all the available inventory to fulfill the entire ecommerce order and still have ample merchandise for its in-store shoppers.

“The last thing we want to do is to have a top come in, and then we ship it out for next-day ecommerce, and then a customer comes (into the store) and it’s not there,” Relich said.

“If I don’t account for ship-from store, then basically what’s happening is, I’m robbing the store,” Relich added.

Using the demand forecasting data helped reduce PacSun’s split shipment rate by about 20%-25%, Relich said, without sharing what its rate is.

Having the order management system factor in hidden costs

PacSun tapped into some of Active Omni’s sophisticated rules in July 2020 to help determine the best stores to ship from. What’s unique about this software, unlike others Relich has seen, is the retailer can input store activity into the rules.

For example, if there are two nearby stores to a customer and one has 30 units of a pair of jeans and another store has 10 units, most order management systems allocate the order to the store with the 30 units. The new platform, however, can look a layer deeper and see what the sell-through rate of that product is at that store. For example, PacSun found in some busy stores, 30 units may only be a two-week supply. But for the store with 10 units, that may be an eight-week supply. The system then factors this in and could allocate the order to the store with the 10 units.

PacSun can also input other costs into the system, such as labor costs. For example, PacSun can say the incremental cost of having store labor pick and pack an order is $1 more than a warehouse order picking and packing that order. If that’s factored in, even if the warehouse is farther away from the shopper than the store and the shipping rate from the warehouse is technically more than shipping from the store, the system may select the warehouse to fulfill the order if the true cost of the order is lower when factoring in the labor.

“It wasn’t like, ‘Let’s do it and we’re done.’ This was continuous improvement,” Relich said about refining PacSun’s order system.

The ideal ship-from-store rate

While ship-from-store surged during the pandemic, now, the average is about 20%-25% of online orders ship from store.

Amy Tennent, senior director of product development at Manhattan Associates, said there is no ideal ship-from-store rate. It all depends on what the retailer’s fulfillment goals are.

Relich said around 20% is a good rate for PacSun. If it’s higher, PacSun has to consider if it is shipping product from a store that could sell it from normal foot traffic.

In addition, if a store has too many orders to ship, PacSun may have to hire additional store employees. Currently, nearly all of its stores handle ship-from-store orders during the lull throughout the day, he says.

“A lot of this, we don’t add extra labor. It gets absorbed,” Relich said. “But if the level gets too high, we’d have to add incremental labor. And if we have to add incremental labor, we’re better off doing it in the distribution center.”

PacSun is No. 239 in the 2023 Digital Commerce 360 Top 1000.

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