Should stores charge for BOPIS?

Discussion
Jul 13, 2015

Claiming the current free service is "unsustainable" for retailers and logistical suppliers, John Lewis, the U.K. department store chain, is introducing a £2 charge for click and collect orders under £30 starting July 28.

Orders worth more than £30 will still be free to collect in John Lewis. The change also applies to Waitrose stores.

The additional charge affects only 18 percent of the retailer’s orders and is designed to encourage shoppers to order more to improve the economics around BOPIS (buy online pickup in store.)

The store handles six million click and collect orders a year, up from 350,000 when it was launched in 2008. Orders are processed at distribution centers and then delivered to the designated shop.

"We are sure customers will understand why we are doing this," Andy Street, managing director of John Lewis, told the Guardian. "There is a huge logistical operation behind this system and, quite frankly it’s unsustainable. We consider ourselves to be leaders and we want to take the lead on this."

John Lewis

Photo: John Lewis

Mr. Lewis also pointed to the collapse last December of City Link, one of the UK’s largest delivery businesses, as a sign that many "illogical" business models stemming from omnichannel pushes have to change for retailers and logistics groups.

Competitors Marks and Spencer, House of Fraser and Next said they had no plans to start charging for click and collect. Sports Direct, the U.K.’s largest sporting goods chain, already charges for the service.

John Lewis made the announcement as Amazon rolled out one-hour delivery for £6.99 for Prime members in certain areas.

Should retailers charge for BOPIS? Do you agree that free BOPIS, at least for small orders, is unsustainable?

Braintrust
"Having dealt with both BOPIS and home delivery fees as a retailer in the past, both are necessary for the sustainability of the programs UNLESS the retailer sees these programs in a more holistic view. One way to rationalize losing money on BOPIS or home delivery is managing profitability at the customer level."
"There is no "should" or "shouldn’t" regarding charging for the service, it all depends on the overhead and level of competitiveness the retailer is seeking."
"From the customer’s point of view it makes no sense. All they see is that they are going to the store to pick up something they ordered online rather than actually picking it out in the store."

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26 Comments on "Should stores charge for BOPIS?"

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Mark Heckman
BrainTrust

Having dealt with both BOPIS and home delivery fees as a retailer in the past, both are necessary for the sustainability of the programs UNLESS the retailer sees these programs in a more holistic view.

One way to rationalize losing money on BOPIS or home delivery is managing profitability at the customer level. Simple to say, but difficult to do. However, most retailers have the means to start looking at shopper segments in terms of overall importance to their sales and profit contribution.

For example, if a BOPIS transaction is provided at a loss, but it is known that most shoppers using BOPIS also shop the store at a very profitable level, then there is rationale to preserve the service in the name of retaining profitable shoppers.

While you can go broke rationalizing selling at a loss, Amazon and others do not seem to be too focused on near-term profitability, rather long-term market share. Maybe they are on to something.

Max Goldberg
BrainTrust

Consumers want free shipping and BOPIS. Whether they will accept free BOPIS with minimum purchase will have to be seen. Perhaps it’s the way that Lewis chose to pick from a DC and deliver to store, rather than have orders picked from their stores.

Dick Seesel
BrainTrust

It’s hard for the consumer to tell the difference between a BOPIS order that was picked from a distribution center and one that was picked from a store’s inventory, which seems to be the growing trend. So it would be hard to explain why she was asked to pay more for a product that (as far as she knows) is already in the store’s inventory. From the customer’s standpoint why stop there, and why not charge her for the right to shop in the store in the first place? Unless you’re Costco, good luck with that.

Bottom line: I don’t see BOPIS charges happening anytime soon in the U.S. retail environment. Stores that are racing to figure out how to make BOPIS work for their market share aren’t about to pass along costs to the consumer, and the idea of “free shipping” as a settled practice would make BOPIS hard to swallow.

Ken Lonyai
BrainTrust

There is no “should” or “shouldn’t” regarding charging for the service, it all depends on the overhead and level of competitiveness the retailer is seeking. The fact that free BOPIS is unsustainable for any given retailer is their problem. If consumers accept that BOPIS is a cost they have to bear, then retailers might try to get them to accept fees tacked on for health insurance, rent increases, etc. (tongue in cheek).

The bottom line with e-tail and retail is that the seemingly free services are paid for somewhere and somewhere is usually in the price of goods, be it obvious or not. The problem for the near future is that Amazon and a few others are eating brick-and-mortar retailers’ lunch so they are going to have to find other ways to be competitive, or drop their margins to maintain the appearance of free services while paying for the overhead of operating physical stores.

Kevin Graff
BrainTrust

The notion of charging a customer for BOPIS is poppycock! (seemed like the right choice of words given John Lewis is British.)

Keep in mind you’re asking the customer to come to your store, you’re not delivering it to their home.

Here’s a better thought: How about leveraging the fact that you’ve actually got the customer into your store by selling them some other stuff? That was one of the original ideas behind this notion of BOPIS. Now it seems that some retailers view it as only a transaction, not an opportunity.

Chris Petersen, PhD.
BrainTrust

Whether retailers should charge for BOPIS is the wrong question.

In today’s omnichannel world it is the consumer who decides where, when and how much. Consumers today have many choices of where they purchase and how they choose to collect the goods: delivery at home, in-store or somewhere in between.

With a plethora of free home shipping options available, consumers will probably not pay a lot for BOPIS. That said, John Lewis’ very modest charge for small items does not seem exorbitant. Their minimum order size for free BOPIS also seems reasonable and in line with many web sites.

A major critical success factor in the future of retail will be logistics. Retailers with “virtual shelves” and integrated supply chains will be the ones in the best position to offer consumers more choices of goods, more choices of delivery and at the lowest cost.

At the end of the day, the only opinion that counts is the consumer’s.

W. Frank Dell II
BrainTrust

It is time retailers start doing real costing to understand their real costs of moving merchandise from supplier to customer. From our DPP and ABC work I can tell you many transactions are simply costing more than selling off the shelf. I continue to see retailers making blind changes without an understanding of cost or consumer wants. Without question small orders are unsustainable as the gross margin does not even cover the logistics expense. Just like small online orders. Charging for store pickup will in the long-term be a looser.

Cathy Hotka
BrainTrust

The main reason people buy online is that they don’t know whether an item is available in the store or not. Provide better visibility into whether an item is available in the store and they might come by and get it themselves.

Graeme McVie
Guest
Graeme McVie
1 year 11 months ago
For some retailers click-and-collect is simply another value-added service that they’re providing customers and it is a cost of doing business to ensure they continue to capture an increasing portion of each customer’s monthly spend. Other retailers will look at click-and-collect and perform the simple math of taking their margins per order and subtracting out the operational cost of click-and-collect, and will arrive at the view that the economics do not work. The most likely path forward for grocers will include a variety of components: grocers need to do a better job of telling the value story around click-and-collect (would you pay someone $5 to walk around a store for 30 minutes for you and pick up and bag your groceries?) They need to recognize which customers are truly valuable and loyal to them and determine if a click-and-collect fee makes sense given those customers’ lifetime value. Where they decide to charge a click-and-collect fee, grocers need to ensure that the fee is commensurate with the value being delivered so that they do not discourage valuable shoppers from using the service. And they need to offer some kind of free trial to encourage shoppers to use click-and-collect so that any… Read more »
Gene Detroyer
BrainTrust

From the customer’s point of view it makes no sense. All they see is that they are going to the store to pick up something they ordered online rather than actually picking it out in the store. They don’t care if it comes from a distribution center or the store inventory. In fact, everything in the store inventory at some point comes from a distribution center. This kind of thinking by the retailer shows they are implementing omnichannel without really understanding why.

Adrian Weidmann
BrainTrust

From a shopper’s perspective, an additional charge for connecting with your brand online, purchasing merchandise for which I am planning to travel to your store to collect seems as though I am being punished. Why should I pay more than casual shoppers who just happen to be in your store? It seems as though I’m paying for John Lewis’s flawed process.

You already know that I’m coming to your store. Why not surprise and delight me when I arrive to pick up my purchase and thank me for being a customer with a token of your appreciation, like a voucher for a discount on an additional purchase in the store during my visit? Or a simple thank you from a sales associate.

Perhaps you could find a way to trim the overhead for those in-store fixtures, lighting, etc., if it helps repeat business from 18 percent of your shoppers who are already buying from you!

Shep Hyken
BrainTrust

Retailers are going to have to figure this out. If they start charging for something the customer has expected (because of past experience) at no charge, they risk alienation. Some retailers will try to be competitive and continue to offer BOPIS at no charge. Some will want to charge for the smaller orders. Maybe consider taking a chapter from Amazon.com and offer a Prime-like membership to create some loyalty and give value back to the consumer.

Ralph Jacobson
BrainTrust

Retailers have provided many services at no charge to the shopper for years. The challenge arises when the shopper has become accustomed to getting the service for free and the retailer starts charging for it. The shopper has to see the added value of the service, whether it’s BOPIS or whatever. I think there are enough opportunities to drive additional, high-margin revenue by driving the shoppers into the physical stores without the need to charge for BOPIS in most cases. The costs of this service can be integrated into other areas.

Peter Fader
BrainTrust

First, let me say bravo to all the commenters who wisely pointed out that BOPIS should be judged on the basis of overall customer profitability, not the profitability of any one single transaction. It’s great that such thinking is (slowly but surely) becoming the norm for leading-edge retailers.

Let me just add one other comment: let’s avoid fees for transactions but think more about fees on returns. In the case of BOPIS (and other cross-channel activities) consumers would understand the role of a restocking fee much more than an initial transaction fee.

And, of course, let’s use these fees as a way to reward our best customers (i.e., by not charging them) while simultaneously defending our profit margins against mercurial cherry-pickers.

James Tenser
BrainTrust

I think most retailers will have a hard time justifying a pickup fee, considering the expectation of free delivery that has been cultivated by Amazon and others. Even factoring in the operation of drive-through sites, pickups have to be less costly than vans to homes.

Click-and-collect pickups aren’t designed to get people in to the store, so retailers cannot count on impulse or add-on purchases to up the profits. Neither can they offer promotional opportunities to brands for incremental revenue (not subsequent to what happens on the ordering website, at least).

Retailers may look at the pickup either of two ways: As a stand-alone event that must deliver payback on its own or as an added-value element in a profitable customer relationship.

The home-bound commuter who wants to glide by and collect a six-pack and a box of nappies is part of a household, after all.

Herb Sorensen
BrainTrust

It’s a bit like saying, NO, we are not going to play in the winning game Amazon and Costco are. Bear in mind that both of those rising, and rising, and rising, retailers, have MEMBERSHIP fees giving them a baseline of “free money” from their loyal customers. Tipping the game against BOPIS is an early white flag, in preparation for losing the game. Here come more Kmarts and Sears’!

Fees for BOPIS is NO way to solve the real problem: “The Problem: ‘Parked’ Capital.

gordon arnold
Guest
Someone will always pay for services rendered to the customer. In the case of BOPIS this may already be considered a part of the retailer’s cost of doing business because it is established as such. Companies of any size know that handling product costs money and the more you handle product the more you spend to provide for the customer. It is no secret that the companies owning e-commerce and brick-and-mortar venues will usually see large margin from the e-commerce side. Or do they? When accounting is allowed to bill the e-commerce side for services like store returns, distribution/logistics and BOPIS order assembly, staging and loading the profits may see a surprising favor shift. The better solution is to see any and all sales and services as one with a set of books that will allow for a single set of budget requirements based on a corporate financial plan designed to view down to store department by item. This is already being done by most and will be evident along with new accounting needs when company reports are reviewed and updated for a single reporting plan. Assigning e-commerce orders to an identifiers that are owned by each department in every… Read more »
Kai Clarke
BrainTrust

No. BOPIS should be leveraged as part of customer service, averaged over the cost of all of the products, and include the savings that lower labor costs enable the retailer to realize when using the BOPIS model. Fewer touches, smaller retail footprints, and identifying inventory better are just a few of the advantages of a BOPIS model, regardless of product price.

Larry Negrich
BrainTrust

Charging for this service is a non-starter at this point. Retailers should justify the cost of this service by doing more with the customer while in the store. BOPIS gives brick & mortar retailers the advantage of knowing a customer is going to be in their store. Beyond that, because this purchase was transacted on their website, they have history to build a unique promotion to drive additional in-store purchases. Retailers shouldn’t hope for an impulse buy or that the customer is going to wander the store, utilize these visits with marketing tactics that encourages additional purchases.

Small order, any order: the customer is in the store. Now put some strats in place to leverage this interaction.

Tony Orlando
BrainTrust
I had to read some comments before I chimed in, so here goes. As a retailer with very thin margins, it would be extremely difficult not to charge for BOPIS, as it takes employees to pick and handle the transaction. With that in mind, I would like to pose a question to my advisors and consultants who contribute to this panel. Is your service you provide free, whether it is on the phone to a client or face to face with your clients? I would think not, unless they are on a retainer or monthly fee. This is in no way a shot at consultants who do valuable work, but the services we provide for our customers are expected to be provided free plus free delivery. I do not have a subscription annually for my customers to shop here, nor do I have the ability to build prices into my cost of goods, as this is something you just cannot do in the food business, as there are competitors on every street looking to take your business away. So what do we do? I have a surcharge for delivery on my catering service based on proximity to my store ranging… Read more »
Michael Day
BrainTrust
Reminded of the old retail adages espoused as Retail 101 by both Sam Walton and Jim Sinegal: Retail Marketing Rule #1- Find a way to get Customers in the Box (with Sinegal/Costco it would be “get ‘the right’ Customers in the Box”); Retail Marketing rule #2: Make sure only good things happen in the Box (the right merchandising and features to drive impulse sales; cross-sell; up-sell; and of course, good customer service, etc.). With BOPIS, retailers have an additional tool to “Get Customers in the Box” and the onus is really on them (primarily at the store level) to make sure they can capitalize on and monetize that “incremental” traffic. Different retail formats would of course have different operational challenges when it comes to BOPIS, but not sure why you would ever want to charge customers for visiting your store. The better way, especially in light of that ever present “Amazon Factor”: Find a way to make the BOPIS numbers work by a focus on driving incremental sales and margin, etc., targeting (with personalized offers?) BOPIC traffic. Additionally, despite the many advantages of web-only sales, more and more we see brick-and-mortar stores playing a vital role in driving conversion rates,… Read more »
Gajendra Ratnavel
BrainTrust

If you ask your customers to pay, there has to be some value. If the customer is ordering one item and wants to pick up in-store, then it is similar to checking stock at the local store then going to pick it up. Charging for this doesn’t make sense to me. However, if the service is like what Walmart is doing with their lockers where a Walmart employee is actually picking the items and storing it for you to pick up, that seems reasonable. Perhaps charge by the number of items?

Peter Charness
BrainTrust

Perhaps the customer can charge a retailer for time wasted by reading an ad, coming to the store to pick up the product, and then finding it out of stock.

Retailers work across averages and some methods of serving the customer may not be profitable, like handling larger less expensive items through a DC. The retailer has to decide if their business model is going to include these types of services and then figure out how to make enough money overall to cover their overall “logistics network” costs. Win some lose some, but great customer service at fair prices always seems to work for all.

Mark Price
BrainTrust

The lack of delivery charges for in-store pickup represent a significant competitive advantage for retailers in comparison to pure play e-commerce providers. The fundamental assumption underlying the desire to charge customers for BOPIS is a cost+ mentality—examining margin on specific transactions.

If you examine customer value, you will likely find that customers using BOPIS are so much more valuable that the $2 is almost irrelevant. But the $2 charge may keep them from becoming BOPIS customers, in effect encouraging them to purchase from online providers.

The key is to focus on customer rather than transaction value as the deciding factor.

Chuck Palmer
BrainTrust

Two words (and then some more): Amazon Prime

I’m a fan of keeping it simple. My dad used to say, “Make it as easy as possible to separate a man from his money.” Adding fees to something that is still relatively new from a behavioral standpoint is a bad idea.

I agree with Mark Heckman above. This smacks of an operationally-driven approach rather than a consumer-centric view. If we look at the value of a customer holistically, across channels, categories and time does it make sense to penalize them for spending less than a certain amount?

After resisting at first and then more than a year in, I seldom think twice about purchasing through Amazon. Last week alone, my house four separate packages in three days, all because we don’t have to worry about surcharges for something being less than a certain amount.

Arie Shpanya
Guest

It’s definitely a tough call because shoppers don’t want to pay for shipping or BOPIS, but for some retailers it’s a necessary evil. Amazon is great at taking a loss to gain market share, but that strategy can’t work for all retailers. It’ll be interesting to see if there is a difference in sales between the retailers who do and don’t charge for the service.

Regardless, offering a minimum order value to qualify for free shipping is a great move to get shoppers to buy more per order and will hopefully offset the cost of BOPIS.

wpDiscuz
Braintrust
"Having dealt with both BOPIS and home delivery fees as a retailer in the past, both are necessary for the sustainability of the programs UNLESS the retailer sees these programs in a more holistic view. One way to rationalize losing money on BOPIS or home delivery is managing profitability at the customer level."
"There is no "should" or "shouldn’t" regarding charging for the service, it all depends on the overhead and level of competitiveness the retailer is seeking."
"From the customer’s point of view it makes no sense. All they see is that they are going to the store to pick up something they ordered online rather than actually picking it out in the store."

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