Lucky is assessing multiple facets of its omnichannel strategy, such as a new distribution center, localized inventory and reducing split shipments.

Omnichannel shoppers are a high priority for Lucky Brand LLC.

While roughly 30% of Lucky Brand’s sales occur online, the denim and apparel retailer’s stores play a crucial role in its overall operations, Lucky’s chief operating officer Michael Relich told Internet Retailer at the National Retail Federation 2019 conference in January.

Lucky, which operates 250 stores, fulfills more than 40% of its ecommerce orders from its physical locations, he said. The majority of those orders are shipped to customers’ homes, while a “mid-single digit” percentage are picked up in a store, he said.

Catering to omnichannel shoppers is increasingly important, he said, given that Lucky shoppers who shop across the brand’s website and stores have a  lifetime value that’s three times that of a single-channel shopper. To improve its ability to serve those shoppers, it is currently assessing multiple facets of its omnichannel strategy, including the possibility of a new distribution center, adding localized inventory pricing and reducing split shipments.

Lucky rethinks its distribution centers

Lucky has two distribution centers in the U.S. (one in California and one in Tennessee) and one in Canada. One U.S. distribution center is primarily focused on wholesale and retail shipments, while the other replenishes store inventory and ships online orders directly to consumers.

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Lucky currently uses a rules-based system to determine which distribution center, stores, or combination of both, should fulfill the order. The system evaluates each location’s inventory levels, as well as the store’s foot traffic and the facility’s distance from the shopper.

The retailer prefers to ship items from distribution centers because that’s the cheapest fulfillment method, Relich said. However, Lucky averages roughly two units per ecommerce order and one store or a distribution center may not be able fill the order. That requires the retailer to send “split shipments,” or multiple packages for the same order.

Currently, between 25-50% of its ecommerce orders are in split shipments, and the goal is to get below 20%, he said. Lucky’s goal is to decrease that percentage because split shipments erode its margins.

It plans to do so by consolidating its distribution centers into one large omnichannel distribution center. Currently, Lucky is conducting a freight study to look at the best place to have an omnichannel distribution center when considering speed and freight costs.

Another benefit of having one centrally located distribution center is speed of shipping to shoppers. Right now, shoppers receive an online order typically in four days, and it wants to reduce that to about two days for most shoppers, Relich said.

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Even though buy online pick up in store is not a large portion of ecommerce orders, Lucky would like that to grow that share to drive traffic into its stores, Relich said.

In addition to selling and helping shoppers, associates are also now charged with helping capture shopper data. In addition to capturing shopper data online, within the past few years it trained its store associates how to casually ask customers for an email address. Previously, Lucky associates were tasked with asking for an email address, however, many didn’t because they were shy and weren’t trained on how to do it.

Lucky also had to “clean” its data and consolidate multiple entries. For example, matching a shopper who may go as both “Stephanie Smith” and “Steph Smith” with the same email address is likely one person. At the extreme end, one account had 23 different data points associated with it, he said.

As of January 2019, Lucky has 5.8 million email addresses in its database, up from 1.9 million at the beginning of 2017.

Lucky is beginning to work on customer segmentation and catering more toward individual shoppers, such as letting a price-sensitive shopper know about sales, or a alerting a shopper who typically buys denim of new styles.

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Another new initiative Lucky is looking into is displaying local store inventory to shoppers on the web based on their location. It began testing this feature in the third quarter 2018 with location vendor Radius8 Inc.

The retailer put the feature on “dead space” on its ecommerce site, or pages that are dead ends, like the store locator page. At least now shoppers can see some of its products on those pages.

In addition, Lucky wants to experiment with pricing in the future. For example, at the end of summer in cold-climate cities like New York City, it will discount shorts and other summer apparel. However, in warm weather areas like Florida, it will not want to discount these items. By tapping into a shopper’s location, the retailer can then price products accordingly, he said.

In December, ecommerce sales were “extremely strong” and up a double-digit percentage.

Lucky has used the Salesforce ecommerce platform for the past five years, which has enabled the retailer to quickly integrate with other technology vendors and not have to worry about updates to its platform, he said.

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“It allows you to focus on ecommerce and selling,” Relich said.

Lucky Brand is No. 693 in the Internet Retailer Top 1000.

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