Retail Fulfillment in 2025 – A Comprehensive Overview

In late 2024, Kohl’s attempted to slash merchandise inventories in response to weak consumer demand. The move backfired. With inadequate retail fulfillment systems in place, the company struggled to balance stock levels with actual demand. The result was a 13.4% drop in digital sales, frustrated customers, and eroded market confidence. The missing element was clear: real-time inventory visibility combined with intelligent fulfillment orchestration that could align supply with customer expectations.

Many retailers are still facing the same issue today. A 2025 study found that only 36% of retailers maintain accurate, end-to-end inventory visibility. The rest risk costly stockouts, overstocks, and disappointed customers.

The blog outlines what retail fulfillment entails, highlights its growing importance in 2025, explores proven strategies and models, and shows how Locus powers fulfillment at scale.

What is Retail Fulfillment?

Retail fulfillment is the complete process of getting a product from a retailer’s inventory into the customer’s hands, whether through home delivery, curbside pickup, or in-store collection. It extends beyond simply shipping a package; it’s a coordinated system that ensures accuracy, timeliness, and efficiency across every order.

Core Components of Retail Fulfillment

Efficient retail fulfillment relies on several core components that shape accuracy, speed, and customer experience across the order lifecycle.

1. Inventory Management

Fulfillment begins with inventory accuracy. Retailers must maintain real-time visibility across warehouses, stores, and in-transit stock to match supply with demand. Predictive analytics and demand forecasting tools help position inventory correctly and prevent lost sales or forced markdowns. Gaps in visibility often lead to wasted carrying costs and dissatisfied customers.

2. Order Processing

Once an order is received, it must be verified, allocated, and routed quickly. Modern order management systems (OMS) integrate with ERP and point-of-sale platforms to handle this at scale. Automation eliminates manual errors and accelerates fulfillment, ensuring orders move smoothly across ecommerce and in-store channels.

3. Warehousing and Storage

Where inventory is stored determines both delivery speed and transportation costs. Enterprises now deploy regional distribution centers, urban micro-fulfillment hubs, and dark stores to bring products closer to shoppers. These flexible storage strategies help absorb seasonal demand peaks while reducing last-mile pressure.

4. Picking, Packing, and Shipping

Accurate picking and efficient packing are critical to meeting delivery promises. Robotics, barcode scanning, and goods-to-person systems improve throughput, while sustainable packaging lowers waste and costs. Carrier selection and route optimization decisions at this stage dictate both delivery timelines and margin protection.

5. Returns and Reverse Logistics

Ecommerce return rates can exceed 20% of sales (NRF, 2024). Processing these efficiently determines whether a business preserves value or loses revenue. Retailers with strong reverse logistics provide simple customer return options, rapidly assess returned goods, and direct them back into inventory, resale, or recycling channels. Enterprises that treat returns as a service opportunity often gain loyalty rather than churn.

Key Players in Retail Fulfillment

Player	Role in Retail Fulfillment
Retailers	Define fulfillment strategy, manage customer relationships, and decide between in-house or outsourced models to balance efficiency, scalability, and cost control.
Third-Party Logistics Providers (3PLs)	Provide outsourced warehousing, order processing, and delivery services, enabling enterprises to scale quickly without heavy investments in infrastructure or fleets.
Technology Platforms	Use automation and AI (e.g., Locus) to integrate inventory, routing, and visibility, ensuring faster decisions, reduced costs, and improved customer satisfaction.
Carriers and Delivery Networks	Handle last-mile and cross-border deliveries, linking fulfillment nodes to customers. Their reliability, cost, and service levels directly shape customer experience.
Consumers	Actively choose fulfillment options, same-day delivery, scheduled slots, or pickup, forcing retailers to provide flexibility, transparency, and real-time visibility.

Steps in Retail Fulfillment

The retail fulfillment process unfolds in a series of defined steps, each stage building on the previous one to ensure accuracy, speed, and customer satisfaction.

Step 1: Order Placement

A customer places an order online, through an app, or in-store. The order management system (OMS) captures and records all relevant details.

Step 2: Order Processing

The OMS validates payment, confirms availability, and routes the order to the correct warehouse, store, or fulfillment center for execution.

Step 3: Inventory Allocation

Stock is checked and reserved in real time to avoid overselling. Advanced systems may reallocate based on location, demand, or delivery speed.

Step 4: Picking

Warehouse staff or automated systems retrieve items from storage. Accuracy at this stage prevents delays, incorrect shipments, and costly returns.

Step 5: Packing

Items are packaged securely, often with sustainable materials and optimized parcel sizes to minimize waste and shipping costs.

Step 6: Shipping / Delivery

Carriers or delivery networks handle transport. Route optimization tools ensure timely last-mile delivery, while customers receive live tracking updates.

Step 7: Customer Receipt

The customer receives the order through home delivery, curbside pickup, or in-store collection. Success depends on punctuality and order accuracy.

Step 8: Returns and Reverse Logistics

Returned products are inspected and processed for restocking, resale, or recycling. Efficient handling limits revenue loss and improves customer trust.

Key Retail Fulfillment Order Models in 2025

Retailers in 2025 rely on a mix of fulfillment models to meet customer expectations, cut logistics costs, and manage rapid demand fluctuations. The most effective approaches combine speed with flexibility while aligning with product categories and customer preferences.

In-Store Fulfillment (BOPIS, Curbside Pickup)

Stores double as fulfillment hubs, allowing customers to place digital orders and retrieve them on-site or curbside. This model trims last-mile expenses, shortens delivery times, and often increases in-store sales during pickups. Walmart and Target lead in scaling this approach across urban and suburban markets.

Micro-Fulfillment Centers (Urban Hubs)

Compact, automation-heavy facilities located close to city centers process high volumes of small orders quickly. Retailers deploy these hubs to guarantee same-day delivery in dense markets while reducing transportation miles. Kroger has invested in this model through robotics-driven sites built with Ocado technology.

Dark Stores and Distribution Centers

Underperforming retail outlets are being repurposed as fulfillment-only locations, eliminating the need to serve walk-in shoppers. These dark stores allow faster picking and higher order density than traditional stores. Carrefour has adopted them alongside regional distribution centers to expand online grocery operations in Europe.

Dropshipping and Direct-to-Consumer

In dropshipping, suppliers ship products directly to end customers, cutting inventory costs for retailers. Direct-to-consumer brands such as Nike bypass intermediaries to control margins and customer data. Both models improve efficiency but require strong supplier reliability and transparent logistics to protect brand reputation.

Hybrid Models (3PL + Owned)

Many enterprises combine internal fulfillment assets with external 3PL partnerships. Proprietary facilities give them control over high-value orders, while 3PLs provide scale during seasonal peaks or in unfamiliar geographies. Global brands use hybrids to balance efficiency with expansion into new markets.

The table below summarizes the strengths and weaknesses of each fulfillment model:

Model	Benefits	Challenges
In-Store Fulfillment (BOPIS, Curbside Pickup)	Lowers last-mile costs, improves convenience, boosts in-store traffic and add-on sales.	Requires accurate inventory across stores, creates operational strain during peak demand.
Micro-Fulfillment Centers (Urban Hubs)	Enables rapid same-day or next-day delivery, reduces transportation miles, leverages automation for speed.	High setup costs, limited capacity, space constraints in dense urban areas.
Dark Stores and Distribution Centers	Faster order picking, high order density, optimized for online demand surges.	Removes physical store revenue, capital-intensive conversion, requires staff retraining.
Dropshipping & Direct-to-Consumer	Eliminates inventory holding costs, expands product range, allows stronger control of customer experience for D2C brands.	Dependence on suppliers, limited control over shipping speed and product quality.
Hybrid Models (3PL + Owned)	Balances control and scalability, leverages 3PL networks for expansion and peak coverage.	Complexity of managing multiple systems, potential integration issues across providers.

Common Retail Fulfillment Challenges and How to Overcome Them

Enterprises managing fulfillment at scale contend with persistent obstacles that directly affect margins and customer satisfaction. Addressing each with targeted strategies ensures stability and competitiveness in 2025.

Inventory Inaccuracy and Stockouts

When inventory records fail to match actual stock, retailers face two costly scenarios: disappointed customers from unavailable products and excess carrying costs from unsold goods. Stockouts damage loyalty, while overstocks tie up capital and force markdowns.

Strategy: Predictive analytics and automated replenishment align stock levels with demand forecasts. Real-time visibility across distribution centers, stores, and in-transit goods reduces discrepancies and ensures orders are fulfilled without disruption.

Rising Logistics and Labor Costs

Escalating transportation expenses, coupled with seasonal labor shortages, pressure fulfillment margins. For enterprises operating at scale, inefficient routing or idle resources quickly amplify costs.

Strategy: AI-driven automation optimizes resource utilization by dynamically assigning orders, sequencing routes, and streamlining warehouse workflows. Platforms such as Locus DispatchIQ consistently lower fuel consumption, shrink planning time, and reduce dependency on manual labor.

High Return Rates

Returns often exceed 20% in ecommerce categories such as fashion and electronics. Processing these without efficiency drains resources, prolongs resale cycles, and erodes profitability.

Strategy: Smart reverse logistics accelerates inspection, categorization, and reintegration of returned products. Automated systems route items for restocking, resale, or recycling, while transparent customer return policies protect trust and encourage repeat purchases.

Demand Fluctuations

Holiday peaks, promotional campaigns, or sudden demand surges strain fulfillment capacity. Without flexible systems, enterprises risk delayed deliveries and overwhelmed distribution centers.

Strategy: Omnichannel fulfillment distributes orders across stores, dark sites, and regional hubs, allowing retailers to shift capacity fluidly. Dynamic order allocation ensures spikes are absorbed without compromising speed or accuracy.

Read More: What is Omnichannel Retailing?

Poor Last-Mile Visibility

Limited visibility into delivery operations leaves enterprises blind to delays, missed handoffs, or failed deliveries until customers complain. This not only increases support costs but also undermines brand reliability.

Strategy: AI-powered control towers enable live tracking of orders and drivers, real-time exception handling, and proactive customer notifications. Providing transparency improves first-attempt delivery rates and reduces costly service escalations.

Compliance and Returns Complexity

Cross-border shipping, customs documentation, and labeling rules vary by market, creating bottlenecks for international retailers. In categories like fashion and CPG, high return volumes magnify compliance risks and costs.

Strategy: Automation of documentation and labeling streamlines international flows, while tailored return workflows for high-turnover categories reduce revenue leakage. Enterprises with strong compliance frameworks protect margins and accelerate cross-border growth.

Other Best Practices for Retail Fulfillment

Outsourcing vs. In-House Fulfillment

Building proprietary fulfillment networks offers control but requires significant capital. Partnering with 3PLs provides scalability and geographic reach. Many enterprises adopt hybrid models, retaining control of high-value orders while outsourcing overflow to external providers.

Customer-Centric Delivery Options

Shoppers increasingly expect delivery choices such as same-day, scheduled windows, or curbside pickup. Providing flexible options lowers missed deliveries, increases satisfaction, and builds long-term loyalty.

Sustainability in Fulfillment

Environmental performance is now a board-level metric. Using eco-friendly packaging, optimizing delivery routes to cut emissions, and deploying energy-efficient storage systems improve both brand reputation and cost efficiency. Platforms like Locus quantify these gains by reducing distance traveled per order.

How Locus Simplifies Retail Fulfillment in 2025

Retail fulfillment today requires coordination across multiple moving parts, dispatch, carrier management, exception handling, and customer communication. Locus provides an AI-driven logistics orchestration platform that unifies these capabilities, allowing enterprises to cut costs, improve reliability, and deliver consistently on customer expectations.

Dispatch Planning: Intelligent Dispatch Automation

DispatchIQ analyzes delivery windows, driver schedules, vehicle capacity, and traffic conditions before assigning tasks. By automating these decisions, enterprises reduce planning time, increase driver productivity, and maintain on-time performance even during peak demand.

Control Tower: End-to-End Visibility

The Control Tower offers a live view of every order from creation to delivery. Managers track progress in real time, identify potential disruptions, and intervene before they escalate, reducing failed deliveries and service calls.

Order-to-Delivery Automation

Automated workflows handle allocation, monitoring, and exception resolution across the delivery cycle. Failed attempts trigger rescheduling, rerouting, or diversion to alternate pickup points, preventing revenue leakage and ensuring customers receive timely updates.

Carrier Management Platform

Retailers working with multiple carriers can compare pricing, track performance, and allocate shipments to the most effective partner. This approach not only minimizes freight spend but also strengthens delivery consistency across regions.

Suggested read: Locus for Retail Carrier Management Platform

Unified Differentiation

Locus integrates these functions into a single platform, delivering orchestration that extends across the entire fulfillment journey.

Read more: How to Prevent Retail Supply Chain Attacks

By consolidating fragmented processes into one platform, Locus enables retailers to transform fulfillment from a cost burden into a strategic capability that drives customer loyalty and sustainable growth.

High returns, rising costs, and delivery delays don’t solve themselves. Talk to Locus and learn how orchestration removes the friction from fulfillment.