Weekly Update

The battle of bricks, clicks and logistics

Retailing used to be all about location. Competing merchants fought over the choicest spots to open their storefronts based on traffic patterns, ease of access, population density and the demographics of the local clientele.

With the rise of e-commerce it became a question of convenience. Consumers could shop and buy without ever having to go to a store if they were willing to wait a few days for their items to be delivered. As the success of Amazon attests, quite a few were willing to wait.

Increasingly, however, retailing is becoming a multi-front war, with online retailers adding on-the-ground capabilities such as same-day delivery, while brick-and-mortar merchants ramp up their online efforts. And as the old military adage has it, when it comes to  war good generals study tactics but great generals study logistics.

This week saw some significant moves, particularly by brick-and-mortar retailers, to bolster their logistical capabilities as they look to add some of the convenience elements of online shopping to their physical offerings. Home improvement chain Home Depot announced at an investor conference Wednesday that it will invest $300 million in the fiscal year beginning in February to bulk up and improve its supply chain to support its rollout of same-day delivery service and other e-commerce ambitions.

The money will go toward adding fulfillment centers and overhauling its warehouse technology systems to more closely integrate its in-store and online inventory management. One of its strategies will be to handle fulfillment of online orders from its stores where possible to speed up delivery times. The retailer hopes to have 100,000 items available for same day delivery, senior VP of supply chain Mark Holifield told analysts.

Same-day delivery from stores is also the goal of a new partnership unveiled this week among four major shopping mall developers and venture-backed startup Deliv Inc. The service will allow shoppers to drop off their bags and packages at a central location in the mall for home delivery later in the day. The service, which charges shoppers about $5 per delivery, is currently available at nine malls in Los Angeles, San Francisco, Chicago and San Jose, and the operators plan to expand to more malls next year.

The developers say they don’t expect to make money directly from the service. The goal is to encourage shoppers to hit more stores in the mall and buy more by relieving them of the burden of schlepping a lot of bags around.

Investors are also starting to smell opportunity in logistics. Ottawa, Canada-based e-commerce platform provider Shopify this week announced a $100 million funding round as it looks to expand its business to support brick-and-mortar retailers as well. Earlier this year, Shopify introduced a in-store point-of-sale (POS) application designed to run on tablets that allows merchants to manage both their online and brick-and-mortar POS and inventory systems through the same dashboard.

The funding round was led by OMERS Ventures and Insight Venture Partners and also included Bessemer Venture Partners, FirstMark Capital, Georgian Partners, and Felicis Ventures. Sources told the Wall Street Journal the round was based on a valuation “near $1 billion.”

“Our vision is that the future of retail isn’t online versus offline, it’s about consumer choice,” Shopify CPO Harley Finkelstein told GigaOM. “Thirty percent of our [on line] merchants have told us that they sell on some kind of offline channel. Our future is that it’s not about online vs. offline shopping — it’s only about retail.”

And retail is increasingly about logistics, supply chain and inventory management, not price, convenience or location.