Dive Brief:

• Target and Kohl's, two retailers with store-centered e-commerce fulfillment strategies, displayed differing inventory strategies in earnings calls last month. 
• Inventory has been trending down in recent quarters as retailers seek to boost margins by avoiding markdowns. But store-centered omnichannel fulfillment calls into question whether the trend will last through peak season. 
• Target reported a 19% rise in inventory year-over-year for the third quarter of 2018 while Kohl's reported just a 5% uptick in overall inventory while decreasing per-store inventory for the 11th straight quarter. 

Dive Insight:

Anyone who has placed an online order of multiple items at Kohl's or Target lately knows you're likely to receive it in multiple packages. Both retailers have put stores at the center of their fulfillment strategies in order to get a product to customers faster, but that often means that each item ships separately from multiple locations. 

For several quarters now, Target has been focusing on using stores for e-commerce order fulfillment. In fact, last peak season the retailer fulfilled 70% of its orders from stores. For Kohl's, which has also been building a similar ship-from-stores capability, that number was more like 36% of Q4 orders. 

But how does this fulfillment strategy jive with the general trend — and Kohl's expressed strategy — of minimizing inventory? 

Based on the peak season preparation described on their November earnings calls, the fulfillment strategy doesn't necessarily determine the inventory strategy. 

Joe Dunlap, managing director of supply chain advisory for CBRE, who did not have specific insight into the inventory of either retailer, told Supply Chain Dive that in theory, it comes down to timing, previous sell-through and order size.

Earlier peak season orders could bolster inventory at the end of November and mean nothing for holiday expectations and demand forecasting, said Dunlap. Likewise a weaker sell-through going into peak season could lead to higher overall inventory levels without meaning much for peak season sales or fulfillment. If higher inventory comes from larger order sizes, that could mean a bullish outlook for holiday sales amid positive economic trends.

Differences in peak season inventory increase could, however, speak to store fulfillment strategy suggested Dunlap.

"The idea that more inventory is needed for ship-from-store or buy-online pickup-in-store isn't necessarily true. What in theory it does is it creates the inventory turn, which means that the store might need to be replenished more frequently from the DC or the vendor during these spike periods of the year," said Dunlap.

In other words, leaner inventory likely means more pressure to fulfill stores with frequency and precision, as stores that may normally get a truck from the DC once a week receive deliveries every day or even more frequently to keep up with demand.

Dunlap suggests driving to the back of the store on your next shopping trip and checking for ocean shipping containers to see if store fulfillment is going smoothly this peak season. 

The containers, he said, are often "symptoms of a broader problem." But container or not, overall inventory increase isn't a major determining factor in success. The product has to be at the right place at the right time, said Dunlap.

With more and more complex operational strategies, it's getting harder to compare retailers, and fulfillment is one of the complicating factors. Though it might follow that store-centered fulfillment would lead to more topline inventory since the same items need to be spread out across the retailer's network, these two examples prove that when it comes to omnichannel retail, N=1.