CSCMP's Supply Chain Quarterly
August 01, 2015
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Are you ready to supply the virtual store?

If "virtual stores" like those operated by Tesco in South Korea catch on, they could change the way retailers stock and deliver consumer products.

One of the most interesting developments in retail last year occurred in South Korea. Homeplus, a division of the U.K.-based grocer Tesco, set up "virtual stores" in subway stations in Seoul because those locations were deemed easily accessible to time-pressed shoppers on their way to and from work.

The virtual store displays images of grocery items on a huge panel stretched along the subway platform walls. To place an order, a customer who has a Homeplus account scans a pictured product's two-dimensional bar code with his or her smart phone. As each item is scanned, it is placed into the customer's online shopping cart. After the order is complete and payment has been made, Homeplus picks the order and delivers it to the customer's door the same day, typically after commuters arrive home in the evening. (Tesco's promotional video shows how it works.)

This new retail concept has proved very successful to date. Homeplus said it has already increased sales by 130 percent, and it's looking to expand the virtual stores to bus stops.

If Tesco and other retailers pursue the virtual store concept, it could have a profound impact on supply chain operations. For starters, there would be no need to ship product to a retail store to stock shelves. And since the retailer must fulfill a commitment to deliver orders from the warehouse to the consumer's door by evening, it will require different timing than many companies are accustomed to.

While many supply chain chiefs are worrying right now about the complexities of far-flung global operations, the biggest challenge for those in the retail and grocery industries may soon appear right in front of them: mastering the art and science of home delivery.

James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. Prior to becoming an analyst, he was the editor of CSCMP's Supply Chain Quarterly, a journal of thought leadership for the global supply chain management profession. He also spent 20 years as an editor at Reed Business Information, where he worked for such publications as Logistics Management, Warehousing Management, and Modern Materials Handling and served as the launch editor for Supply Chain Management Review. Wiley published his book on supply chain trends, Protean Supply Chains, in 2014.

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