E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
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.”
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.