October 30, 2008, 12:00 AM

Profits in Pick-up?

(Page 2 of 2)

But for other retailers, space is a big issue, says Fiona Dias, executive vice president of partner strategy and marketing at e-commerce technology provider GSI Commerce Solutions Inc. and former chief of e-commerce at Circuit City.

For instance, executives at Target have told her they have not implemented a program because they don’t have enough space in stores to stage online orders waiting for pick-up. “None of their merchants want to compromise on the amount of space they have,” Dias says. A Target spokeswoman says the chain has not introduced a ship-to-store service because it believes the benefit of online shopping for consumers “is not having to travel to a store to make a purchase.”

The costs of developing in-store pick-up programs can be offset if consumers like the service-and many do.

A recent poll found 32% of consumers had ordered an item online and picked it up in a store, and 80% of those who used the service were considering doing so again during this holiday season. The poll was conducted by Harris Interactive for Shopatron, which enables in-store pick-up for manufacturers and retailers.

The relatively high percentage of consumers who have picked up web orders in store could reflect the fact some of the largest retail chains offer the service. Sears, Best Buy and Circuit City offer same-day pick-up; Wal-Mart, Sam’s Club, Ace, REI and Cabela’s offer a ship-to-store option.

By far, the biggest reason consumers use the service is to save on shipping costs, cited by 50% of respondents in a survey by The E-tailing Group. Next comes the convenience of knowing the product will be ready when the consumer wants it, cited by 22%, and an immediate need for a product, selected by 18%. A third of respondents said they would drive more than 25 miles to pick up an item ordered online.

Consumer interest shows up in the sales figures of retailers offering in-store pick-up. Circuit City says 50% of the dollar volume of orders on its web site is for in-store pick-up; Ace says 65% of its web orders are shipped to stores, and REI 45%.

Kayaks and canoes

Ace says its surveys show free shipping is a big reason consumers use the ship-to-store option. The company originally offered 70% off the shipping cost of items shipped to stores, but when it made shipping free the percentage of web sales for store pick-up shot up from 40% to 65%. “When you put that word ‘free’ out there, consumers really gravitate to that,” Lowe says.

REI initially conceived of in-store pick-up as a way to offer free shipping, Brown says. The retailer figured since it was already sending trucks from two warehouses to 99 stores it would not cost much more to add on web orders. REI customers often use the service when ordering items like kayaks, canoes and car-top equipment carriers that would be expensive to ship.

But Brown says customers also use the service to make sure they don’t waste a trip to the store, and because some are not comfortable letting a package sit on their doorstep while they’re at work. In-store pick-up also makes available the full assortment on REI.com to consumers in smaller markets where REI stores stock fewer items, Brown says.

While I’m here…

A big part of the business case for buy online/pick-up in store is that consumers buy other items once at the store. A recent survey of multi-channel retailers by Forrester Research found 28% of online shoppers picking up in stores make an additional purchase.

Ace and REI both say about 30% of customers make additional purchases when collecting online orders. At Ace, the additional spend is typically $20 to $50, Lowe says.

And Lowe is convinced the program helps attract new customers. “Our goal is to get them into the Ace brand, whether in store or online,” he says. “We want to make sure they have a great experience, and free ship-to-store is one way to kick that off.”

Upscale department store chain Nordstrom Inc. is among the latest to get into the game, launching in September same-day pick-up of selected items, a noteworthy initiative for a retailer that mainly sells apparel. Grocery stores continue to test the concept. Although the Albertson’s chain dropped its program, Meijer Inc., which operates 181 supermarkets in the Midwest, began a trial in September at a store in Grand Rapids, Mich., where consumers can pick up online orders at a designated area in the parking lot. And Piggly Wiggly Carolina Co. began a similar test in 10 stores in South Carolina last month.

The data integration and coordination between web site and stores is a significant challenge. But, little by little, more retailers seem to be concluding that order online/pick-up in store programs can be justified by gains in store traffic and customer loyalty.


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