Pick-up Artist

As more retailers launch buy online/pick up in store programs, competition is forcing them to differentiate the service

If imitation is the sincerest form of flattery, Circuit City Stores Inc. should feel quite flattered. The retail chain in 1999 pioneered the customer-pleasing and sales-boosting buy online/pick up in store service. Other major electronics retailers more recently have followed suit—and helped refine the multi-channel strategy.

CompUSA Inc., for instance, promises to have online orders ready for in-store pick-up within 15 minutes and says customers using the service spend up to 40% more than store-only shoppers.

This kind of success enjoyed by electronics retailers has prompted other merchants, such as Sears Roebuck and Co., to follow suit. During the 2006 holiday shopping season, Sears, which has offered in-store pick-up for several years, ran an aggressive television ad campaign specifically promoting in-store pick-up of online orders and highlighted the service in post-holiday ads.

The goals of the programs are to differentiate a retailer from others while easing shopping for customers. But the growth of the number of retailers offering buy online/pick up in store programs has created challenges for retailers in the game—they must find ways to keep the programs fresh as well as different from those of competitors. “This is a service we will continually refine to meet customer expectations,” says Al Hurlebaus, senior director of e-commerce at CompUSA.

Making a buy online/pick up in store program work means providing shoppers the highest level of convenience. The most common strategy is to guarantee the order will be ready for pick-up in less than 30 minutes.

Offering a fast turnaround caters to the needs of multi-channel shoppers because they are often shopping under time constraints—a problem cited by 40% of multi-channel shoppers in a recent report by research and advisory firm Forrester Research Inc. As a result, they tend to favor self-service sales channels, Forrester says.

Multi-channel shoppers typically know what they want in advance of a purchase, but time constraints often prevent them from heading to a store to shop. Because so many of these shoppers are comfortable using the online channel as well as the store, they’re more inclined to move freely between both channels, the report says. Plus, they have a need or strong desire to have an item in hand the same day it’s purchased regardless of the channel they use.

Short on time

“Consumers that shop online and pick up in-store tend to be short on time, and any service that saves them time or shipping costs is a huge plus,” says Tamara Mendelsohn, senior analyst at Forrester Research. “This concept plays especially well during holidays, when time is at a premium and last-minute shoppers can’t get an item ordered online shipped in time.”

Sears leveraged that selling point in a television ad campaign during the 2006 holiday season. One ad showed a mother in her garage unloading bags of presents ordered online and picked up in store as her kids were exiting the car. The message was busy mothers now can shop more efficiently.

“As buy online/pick up in store programs become more prevalent, retailers will promote them more, through mainstream ad channels such as television, which address in-store shoppers,” Mendelsohn adds.

While fulfillment in less than 30 minutes provides a high level of convenience to shoppers who place an order for in-store pick-up, by itself it is not necessarily enough to excite shoppers to use the service, experts say. As a result, retailers have begun adding perks such as reserved parking spots and special checkout lines to increase customer convenience and differentiate their service.

Circuit City stores offer one or both conveniences. Individual stores are provided the choice because Circuit City figures they play a key role in making the program work, Mendelsohn says. The retailer guarantees an item ordered online will be ready for pick-up at a designated store in 24 minutes. If not, the customer receives a $24 Circuit City gift card.

The retailer, which launched the program in 2005, originally considered a 60-minute fulfillment guarantee. When it considered eyeglasses merchants such as Lens Crafters already promised that level of service, Circuit City decided to create a more aggressive fulfillment window, Mendelsohn says.

At the same time, she adds, store managers complement the shorter timeframe guarantee with other services. “The 24-minute guarantee is not negotiable, but stores do have the liberty to ensure a satisfactory experience by reserving the parking spots or creating dedicated checkout lines for these customers,” Mendelsohn writes in a Forrester study. “Stores can tailor the process to meet individual requirements and limitations.”

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Circuit City, which did not make executives available for this story, trains each employee and call center representative on order fulfillment to meet the 24-minute window. Call center representatives have the same access to inventory and marketing materials as sales representatives in other sales channels.

To help employees better understand the service from a consumer viewpoint, Circuit City gave them gift cards to try the service.

Considering the capability of stores to deliver on fulfillment promises is critical to any buy online/pick up in store program, CompUSA’s Hurlebaus says. “Stores need to have the discipline to meet the guarantees because they are the ones that own the customer,” he says. “Everything we do as an online store is built around that relationship.”

When CompUSA, which operates more than 200 stores, launched its buy online/pick up in store program in 2003, there was no guarantee as to when an order would be ready. Instead, the retailer e-mailed customers when an order was ready for pick-up.

As competitors such as Circuit City enhanced their programs by guaranteeing fulfillment in a specified window, CompUSA began working to achieve fulfillment in 15 minutes. The benchmark was based on customer feedback and store data.

After stores demonstrated they could achieve at least a 95% success rate for fulfilling orders in the prescribed time, CompUSA launched its 15-minute guarantee in November 2006. Shoppers also have the option of picking up an online order later the same day or the following day. “We wanted to differentiate our program. The time guarantee and other pick-up options are a way to do that,” Hurlebaus says.

Fulfilling 95% of online orders in 15 minutes requires each store to integrate its inventory management system with that of the e-commerce site. Shoppers then can identify online items in stock at their local store. To improve customer satisfaction, CompUSA allows customers to search the inventory of stores within a 50-mile radius of a designated ZIP code to provide greater availability of products if a customer’s preferred store is out of stock. CompUSA uses an in-house order management system to link store and web site inventories.

“We get a lot of multi-channel shoppers who research items online and buy in store, and this is a way for us to keep from losing them to another retailer because an item is out-of-stock at one store,” Hurlebaus adds.

However, about 50% of shoppers who research an item online with one retailer will buy the product through another, Forrester’s Mendelsohn says. “That results in a lost sales opportunity for the first retailer,” she says. “So in-store pick-up is a way for retailers to keep these customers.”

Retailers including Sears and consumer electronics and home appliances merchant Best Buy Co. Inc. also are differentiating buy online/pick up in store by making the service available across most categories. Both retailers provide the service only on items that shoppers can carry out and load in their automobiles and clearly mark on their web sites products like refrigerators and other appliances that require delivery.

“Offering in-store pick-up in most major categories, reserved parking spots, designated pick-up lines in stores, and in-store signage directing consumers to the pick-up area are points of differentiation from our competitors,” a Best Buy spokeswoman says. While competitors such as Circuit City and CompUSA offer some of these services, they do not offer all of them, she adds.

While providing extra service to online shoppers, in-store pick-up also leads to increased purchases, retailers say. CompUSA says customers who buy online and pick up in store spend 35% more than customers who shop only in stores. To encourage cross-channel shopping, CompUSA’s store associates suggest add-on items after a customer purchases something online and arrives for in-store pick-up; the retailer also prints in-store offers on pick-up receipts. “We have been very pleased with the results,” Hurlebaus says.

Tuning in customers

The opportunity to engage online shoppers more effectively in cross-selling is a major reason Radio Shack launched its Ship-to-Store program in 1,300 company-owned stores last November. “The aim is to get online shoppers to the store where they can interact with a sales representative who can inform them about accessories they may have overlooked,” says Jimmy Mansker, vice president of RadioShack.com. “Multi-channel shopping strategies are about driving consumer behavior to encourage cross-selling.”

Radio Shack, which plans to roll out the program to 3,400 franchisees this year, acknowledges it needs to better learn how to provide the level of service customers want. “We need to get customer and store feedback first, then we can refine the program,” Mansker adds.

The type of customer feedback Radio Shack wants is how customers feel about such issues as site design and navigation. It also wants feedback from store managers about whether online shoppers are actually shopping in the store when they pick up an item ordered online. RadioShack ships items free of charge to a designated store within three to eight business days. Customers can choose to pay a fee for expedited shipping. Items are held at the store for up to 14 days.

Besides avoiding shipping fees, customers often use a buy online/pick up in store service to purchase products like hot video games prior to their availability in store.

In the two weeks prior to the release of “World of Warcraft: Burning Crusade” in early January, for example, Best Buy says customers tagged more than 70% of online orders for in-store pick-up, which is typical for a game marketed online ahead of its release date in the store. Shoppers can pick up the tagged item the day it hits the shelves.

“Convenience is a big benefit from a customer viewpoint,” Mendelsohn says. “Engaging shoppers through multiple channels enables retailers to keep them more engaged overall.”

While that may be true, buy online/pick up in store is not necessarily adaptable to all retail categories. Apparel, for instance, is one category where the concept may not work as well because retailers dealing in high fashion items tend to keep small quantities of stock by size in their stores because of the vast number of sizes. “You’ve got to have the in-store inventory to make it work,” says CompUSA’s Hurlebaus.

Staying competitive

Outside of apparel and large items that require delivery, experts say the tactic should spread rapidly among multi-channel retailers as shoppers become more accustomed to the service.

“This is a service multi-channel retailers will need to offer if they want to stay competitive,” predicts Mendelsohn. “The number of online shoppers is growing annually and they are moving to the online channel for the convenience, the chance to save shipping costs and other payment options not necessarily available in store. These are important criteria to multi-channel shoppers.”

Peter Lucas is a Highland Park, Ill.-based freelance business writer.