In its second-largest acquisition, Amazon buys the company for $970 million.
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Bricks-and-mortar retailers do have a relatively low-cost way of promising online shoppers instant gratification—same-day in-store pickup. When customers decide they want an item, they want to be able to get it quickly, they don`t want to pay for shipping, and they want to be guaranteed that they get what they paid for, according to Dias, of GSI Commerce. In-store pickup fulfills all those wishes, she says.
That`s why she pushed the option when she was Circuit City`s executive vice president and chief marketing officer. Starting in 2004, the consumer electronics chain guaranteed consumers that if an item they ordered was in stock at a local store, it would be ready for pickup 24 minutes after they placed the order online.
Making that work required the retailer to invest in a system that updated Circuit City`s web site every 15 minutes with the inventory at each of its 600 stores. It also required designated pickup areas in stores, signs to direct the customer to pickup locations and alert systems to notify employees to grab the items ordered, she says.
While Circuit City filed for bankruptcy in 2008, the investment in fast in-store pickup paid off, Dias says, as more than half of CircuitCity.com`s orders were picked up in its stores. "People don`t want their new $300 digital camera sitting on their doorstep," she says. "They like having it kept in a safe place to pick up when they`re good and ready."
In-store pickup benefits retailers by driving traffic into stores. Consumers are also more likely to go to stores if they know an item is in stock, which is why more retail chains are enabling online consumers to check product availability in stores. In 2009, 29% of the 72 chains studied by consultancy The E-tailing Group featured a store inventory lookup, up from 26% in 2008 and 20% in 2007. "It`s another thing retailers can do to make the shopping experience more convenient," says Lauren Freedman, The E-tailing Group president.
If Amazon`s same-day experiment sees significant consumer uptake, bricks-and-mortar retailers could be forced to look toward offering deliveries from their retail stores, says Dias, noting that making such a proposition efficient is difficult.
"For a retailer like Best Buy they have a tremendous advantage in that they have stores—and products—everywhere. But the issue that hangs up such an offering is the issue of scale," Dias says. "If you`re in Chicago and you order a product online that is only in-stock 35 miles away, they`d need to have someone pick it up in the suburbs and drive downtown. While that may be a terrific proposition from a consumer perspective, it probably doesn`t make sense for the retailer."
Rather than embark on such an offering, for now Sears Holdings Corp. is content to push its limited-investment option of curbside, rather than in-store, pickup at most locations. As soon as customers receive their order confirmation, the order is guaranteed ready within five minutes.
"It`s something unique that a pure online player can`t offer," says a Sears spokesman. This was easier for Sears to do because back in 2001 it had created real-time links between its inventory system and the merchandise pickup areas that exist in many Sears stores, says Imran Jooma, senior vice president and general manager, e-commerce.
Sears and other retailers may not be ready to follow Amazon`s lead in offering same-day delivery today, but they will someday—if that`s what consumers demand, says Dias. "Consumers ultimately get what they want," she says. "So if they want same-day delivery, we`re going to figure out how to offer it to them."
Amazon`s same-day offer
Where it`s offered: Baltimore, Boston, Las Vegas, New York, Philadelphia, Seattle and Washington, D.C. Coming soon: Chicago, Indianapolis and Phoenix.
Order cut-off times: New York and Philadelphia, 10 a.m local time.; Boston, Washington and Baltimore, 10:30 a.m.; Las Vegas, 11 a.m.; Seattle, 1 p.m.
Items delivered by: 8 p.m. local time
Price: Consumers enrolled in Amazon Prime, Amazon`s shipping program, pay $5.99 per item. For other customers, shipping rates range in price from $14.49 to $18.99, depending on type of product, plus up to $1.99 per pound, per item.