This content relates to : MARKETING INNOVATION.
Investments in digital transformation initiatives can help mitigate “ship from store” challenges.
Digital initiatives are particularly appropriate for targeting millennial, digitally savvy customers.
Strong relationships with 3rd-party e-commerce fulfillment vendors can facilitate successful digital initiatives.
President & CEO, The Children’s Place
The Snyder Innovation Management Center presents the 2022 CEO series focusing on innovations in the retail sector in partnership with The Robin Report.
Hi everybody, and on behalf of the Robin Report and Syracuse University, we welcome you to my discussion with Jane Elfers who is the Chief Executive Officer of Children’s Place, where she began in January of 2010. And I can attest that the business that she inherited was a mess to put it lightly, across all functions. But as a turnaround expert, she did just that. She developed a multi-prong digital transformation strategy that was rooted in a relentless focus on transforming the business.
We had made a decision back in 2017 to accelerate our digital transformation as it was one of the key 4 pillars that Robin mentioned. And we made a $50 million investment; we came out and told the street we were going to spend $50 million over a 2-year period, a 2-3 year period, to accelerate the digital transformation. And we had quite a few eyebrows raised when we made that decision. “Do you need to spend all that money at once? Why do you need to do it so quickly?” You know, on and on and on. And we said “Because you know we’re thriving to be a digital first company. We have a young millennial, digitally savvy customer and we need to keep up.” And so that was the decision we made to do.
So by 2019, 31% of our business was already in digital, which was industry-leading at that point because of the money we had put in a couple of years earlier behind the digital transformation. Staying on the e-commerce and digital perspective, we had built this digital business up to a pretty big degree and we would get ourselves in “trouble” twice a year, once during the heavy back-to-school period and once during the Christmas time because our 1 DC [Distribution Center] wasn’t able to handle all the orders we were getting in the time to, you know, an appropriate shipping time. And so we had to default to ship from store and so, to make sure everyone knows what ship from store is, it’s when the stores ship out the orders that come through e-comm.
And we’re a little bit, as you know, a little bit of a different bird when it comes to most retailers. We have a really really high UPT [Units Per Transaction], which means our mom orders, you know, 7, 8, or 9 pieces per order versus most retailers that get 1 or 2 if they’re lucky on an order. And so because we have such a high UPT, we had a low hit rate in stores about getting the full order, so we had to do a lot of split shipments. So if you spend $5 shipping it out of your DC, that’s 1 order per 8 pieces. If you had to split it up between 3 stores to get those 8 pieces, it was $15, so you could see how those costs would just mushroom or balloon during those heavy times of the year, which costs us tens and tens of millions of dollars to do ship from store. So that was also, you know, an issue we had going in.
And then from a marketing point of view, we really weren’t very sophisticated in our marketing area. We were underfunded and didn’t have a lot of the right tools and processes in place to kind of keep up with the digital transformation, so we had a lot of work to do on marketing. So now we’re at 50% which no one in soft apparel or specialty is even close. So if we hadn’t had the pandemic, at the pace we were building our digital business, it would’ve taken us at least 5 more years to get to the 50% digital penetration. At the same time, virtually eliminated ship from store, because we had developed a much stronger partnership with our third-party e-commerce fulfillment provider, which was Radial.
So as we said, we were able to develop a much stronger partnership with a third-party provider, so all that ship from store that I said we were doing before, was because we only had 1 DC and we needed to have more and we were not ready to do our DC expansion for another 2 or 3 years. And during the pandemic, we were able to strengthen that relationship and get to the point where we were almost 50/50 meaning 50% of our orders filled by Radial and 50% of our orders filled by our own DC. And what that was able to do for us, it was able to eliminate all that inefficient and all that super-expensive ship from store.
President & CEO, The Children’s Place