Dive Brief:
- Michaels is working to bring e-commerce fulfillment in house "to support future e-commerce growth," Michaels CFO Denise Paulonis said on a recent earnings call. E-commerce orders for the company grew 77% in 2018, accounting for 4% of total sales.
- The crafting retailer is "building a new order management system and retrofitting our alliance distribution center to support e-commerce fulfillment," Paulonis said.
- The company plans to move out of its third-party fulfillment center by the end of the first quarter. It is also now offering BOPIS in all U.S. locations.
Dive Insight:
Michael's switch to in-house fulfillment means the retailer no longer has to worry about the cost associated with a third-party fulfillment provider. But the retailer is facing other cost headwinds. Paulonis said tariffs on Chinese goods resulted in higher product costs. And the company will look at pricing and tariffs this year, working on "understanding which levers we can pull," Paulonis said.
The company planned its financials for 2019 with the expectation that the 10% tariffs will remain in place. "We anticipate that we're going to continue to have some pressures from tariffs coming through and some natural transportation costs as our e-commerce business grows," Paulonis said.
As e-commerce becomes a major driver of growth for retailers, many chains are experimenting with how to best handle online orders. One common result has been that most major retailers take order fulfillment in-house in order to control the entire spectrum of customer experience.
It's difficult to know how Micheal's e-commerce strategy fits in with its competitive set since major competitors Hobby Lobby and A.C. Moore are privately held. This move, however, is a clear sign that Michaels sees e-commerce as a worthy and necessary investment area despite the currently small portion of total sales.
