Are grocers downplaying curbside pickup at their own expense?

Discussion
Photo: Getty Images/Mary Baratto
Nov 10, 2020

A university study finds grocers overly relying on in-store pickup “for the sake of quick, low-cost roll-out” during the pandemic. As a result, many are not maximizing the sales opportunity from providing enhanced curbside and freestanding locker options.

The research from the University of North Carolina-Chapel Hill and Tilburg University found fulfillment convenience offers three different benefits for shoppers:

  • Access convenience: the reduction of time to travel to and from a click-and-collect location and the time spent there;
  • Collection convenience: the reduction of physical effort to collect the order;
  • Adjustment convenience: the ease with which shoppers can adjust their online orders by adding, returning or replacing items.

The three click-and-collect options — in-store, curbside and standalone pickup solutions, such as lockers — “address fundamentally different shopper needs in terms of fulfillment convenience.”

For access-convenience-oriented benefits, both in-store and standalone are best suited for time saving. Researchers wrote in a release, “The time-efficient pickup of stand-alones stimulates these shoppers to spend more at the retailer online. In-store pickup, in turn, leads to positive spillovers to the retailer’s brick-and-mortar stores and, hence, an increase in total spending.”

Collection-convenience-oriented benefits appeal to large-basket shoppers buying more bulky items. Standalone pickup was found to work best for this purchasing segment as a time and effort saver, resulting in the higher total spend at the grocer.

Adjustment-convenience-oriented benefits appeal to larger households who shop more for perishables and buy more on impulse. Standalone and curbside yielded the highest total retailer sales in these markets. Researchers wrote, “While in-store leads shoppers in these markets to spend more online, it also cannibalizes their brick-and-mortar purchases. Even worse, it may even decrease total spending at the retailer and should therefore be avoided.”

The study concluded that click-and-collect needs to be better assessed on a market-by-market basis. Els Gijsbrechts, a co-author, wrote in a statement, “The pursuit of speed without knowing which type is best in terms of demand may lead to the demise of the format.”

DISCUSSION QUESTIONS: Are grocers short changing opportunities around curbside pickup and standalone lockers? Do you think decisions are being made primarily based on overhead costs or are other factors given equal weight?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Grocers have to start thinking less about what's cost-efficient for them and more about what's going to appeal to their shoppers - or risk losing those shoppers altogether."
"Retailers: you can figure out the financials later. Now is the time to listen to customers and give them the socially-distanced experience they desire."
"There may be some overhead costs on these functions now, but companies should see them as investments..."

Join the Discussion!

28 Comments on "Are grocers downplaying curbside pickup at their own expense?"


Sort by:   newest | oldest | most voted
David Naumann
BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
7 months 12 days ago

In a perfect world, grocers would have all three options for online orders: in-store, curbside and locker pickup. However this isn’t economically feasible. Curbside is a new process for some grocers and that is a possible reason that they are not pushing this option as much as they could. Some grocers are in smaller real estate that is sandwiched between stores on both sides which makes curbside challenging. Eventually I see lockers as a great opportunity as once stores place the orders in the locker, they don’t have to staff the area and it offers greater convenience for consumers as they don’t have to wait in a queue.

storewanderer
Guest
7 months 12 days ago

Large high volume stores like Walmart will be able to offer all of these options; they have the space, they have the customer volume to support multiple options, and they have the logistics knowledge.

The grocers are in a tougher spot for the reasons you point out. Some of the grocers have the large high volume stores but not the logistics knowledge.

The other grocers with a variety of store sizes, many landlocked buildings, many small stores and small parking lots, etc. are in a very tough spot to offer these services consistently and efficiently.

Suresh Chaganti
BrainTrust

The challenge is pretty daunting for retailers who are not data driven. Even in typical steady state environments, with a lot of benchmarking data that shows the opportunities for improvement, so many retailers floundered.

Now consider the impact on revenues, cost and profitability based on the fulfillment choices that retailers will promote or discourage. Clearly the digital divide will become wider – between those who are data driven and those who who are not; those who are able to act based on the insights and those who cannot.

Neil Saunders
BrainTrust

Given the massive rise in online orders during the past eight months, grocery retailers have focused on increasing capacity in the best and most efficient way they can. That is the primary reason why there has not been more innovation and nuance in some of the solutions. As things start to reach a new normal, retailers will think more carefully about the fulfillment solutions they wish to employ over the longer term. However costs have to play a part in this decision. For most, online grocery is extremely low margin and this inhibits the ability to develop solutions like stand-alone pickup locations. Of course, this judgement on costs will need to be weighted alongside the benefits of market share gains by offering convenience by maximizing the options available to consumers. Ultimately it will be a fine balancing act.

Carol Spieckerman
BrainTrust

In a word, yes. Grocers are being far too cautious and controlling when it comes to convenience. They should know by now that attempting to curtail convenience and corral shoppers into options that are more profitable or easier to execute just won’t cut it. Smart retailers have learned that taking a portfolio approach is the best insurance policy against shoppers jumping off their platforms and seeking alternatives.

Art Suriano
Guest
I think that grocers are still learning their business as well as their customers’ buying habits. There’s no doubt that the impulse buyer who’s shopping online may spend less because they won’t have the opportunity they have when in-store seeing an item that might pique their curiosity. However online is here and here to stay, and each week more and more customers are shopping that way. The pandemic forced many customers to shop online for their groceries, and now most of them prefer it. So grocers have to look at all the opportunities and try to figure out ways to get customers to buy more so that sales continue to grow. There are costs involved for home delivery, in-store pick-up, curbside pick-up, and lockers, and the only way to remain profitable is to increase sales. That will come from more customers, but the best option is creating the opportunity and desire for existing customers to spend more. Coupons were once the big item; today, with technology, there are so many other ways to reach the… Read more »
Richard J. George, Ph.D.
BrainTrust

The term BOPIS was originally used literally, namely for picking up the online order in-store. As the research noted, access convenience shoppers prefer the original use of BOPIS, which results in higher total rings and margins. While I’m certain overhead costs are considered, I believe grocers focusing on BOPIS believe that if they can bring online shoppers into the store with now empty shopping carts, properly merchandised add on products can make their way into the cart.

By the way, despite the profit potential of BOPIS, retailers need to focus on customer preferences and offer alternatives that address varying fulfillment convenience needs of their market segments.

Brett Busconi
Guest

Short term I don’t feel like this hurts grocers — hey, pretty much all numbers are up for them this year, right? Long term I feel like looking beyond how all options can work best for your clients is a strategic error, and one that could prove costly. Once people are more comfortable with returning to in-store shopping they are unlikely to let go of the bonds with which convenience and consistency will have won from their go-to grocers of choice during pandemic times. The time to make/strengthen those bonds is right now — they will matter down the road.

Jeff Weidauer
BrainTrust

Most grocers still consider online shopping to be a short-term anomaly that will change post-pandemic. While some behaviors will change as consumers feel safe to go out, many won’t as the online habits are now part of the daily routine. Grocers have to start thinking less about what’s cost-efficient for them and more about what’s going to appeal to their shoppers – or risk losing those shoppers altogether.

storewanderer
Guest
7 months 12 days ago

The grocers who consider this a short-term anomaly will miss the boat. Customers will continue to use these pick-up services and then transition to home delivery services long after the pandemic stabilizes or ends.

Shep Hyken
BrainTrust

In today’s pandemic world, the customer needs to feel safe. We have always offered up convenience as an option, but it’s no longer an option. It’s expected. Grocers will have to adapt to what the customer wants, and that’s both convenience and safety. For many, once the pandemic began, the idea of ordering online and picking up at the store (inside or out) was a new concept. It’s now the way many want to do business. Not delivering at this level, in this time, is potentially detrimental to the retailer’s relationship with their customer.

Ralph Jacobson
Guest

There are many factors driving retailer behavior, with a key one being the perennial desire for cross-sell/upsell/impulse buying that curbside pickup, lockers, etc. tend to limit or completely eliminate. That is definitely one of the reasons some retailers are not going “all in” on outside-of-the-store pickup.

Gary Sankary
BrainTrust

For many, many grocers this is a new capability. And this is something that market is forcing them to do, they didn’t come all that willingly. These services are expensive to provide and difficult to scale. I have no doubt that at more than a few companies cost is driving their decisions. The article cites the successes that big box retailers have seen, and credits their investments in click-and-collect before the pandemic as one of the keys to success. I agree. What I didn’t read here was driving customer loyalty and pandemic driven behaviors. Those also need be considered as retailers consider what services are going to be important for their customers.

Andrew Blatherwick
BrainTrust

It is great that universities do research into these topics and we can all learn from their findings. However most grocery retailers are currently running as hard as they can to maximize sales and customer service at the moment without thinking too closely about the finer nuances of this research. Yes, capital cost will have a big part to play in the use of lockers. That is not so in curbside which has been widely adopted, in a very short time frame, by most grocers.

After the peak season is over, retailers will assess the performance of the various channels and look at improving or fine tuning their offering. Now is not a great time to be doing that.

Lee Peterson
BrainTrust

We’ve been doing BOPIS studies for six years now and two things about it have been consistent: 1.) consumers love the option and 2.) they want the merchandise put in their trunks (which has only been exacerbated with COVID-19) We tested nine other methods of BOPIS/BOPAS execution and the “put it in my trunk” option was not only a winner every time, but a winner by an overwhelming margin every time.

So the answer to the question is really clear: NOT doing curbside or drive-thru (like Walmart does by the way) is an operational decision, not a customer-driven one. And in this day and age, we all know what that means; they just go somewhere else or click on the smiley face. Wake up, it’s a new dawn with a new boss — the customer.

storewanderer
Guest
7 months 12 days ago

If they like putting it in my trunk, they will like putting it on my porch even better.

Matthew Pavich
BrainTrust

One trend that is clear across numerous studies this year is that consumers are changing their loyalties and willing to try new things as they cope with pandemic shopping realities. The retailers who have invested in creating more convenient and safer curbside and other channel strategies have an opportunity to grow share. In addition to building the operational structure required to thrive in this new normal, the best retailers are leveraging superior analytics to revise and revamp their strategies across all channels to ensure they are winning on all fronts by offering the right products at the right price across all channels in a safe and convenient manner. Opportunities abound!

Ricardo Belmar
BrainTrust

Cost has always been a strong force in decision making at grocery retailers where margins have traditionally been thin. The pandemic forced many grocery brands to quickly adapt with disregard to cost to embrace curbside pickup, in-store pickup, and delivery capabilities for online ordering. Looking ahead, many grocers will want to evaluate how they improve their cost position on these services. Hopefully they will all realize that consumers are expecting these services to stay and the real answer lies in understanding which customers want to use which service the most so that the retailer can tailor their messaging and special offers to those customers to entice them to lean towards the more profitable options. I believe this study is really telling retailers to consider that this is going to vary from community to community and they are going to have to adapt their marketing, positioning, and operations accordingly if they are to optimize the costs of these services. This is not going to be a one-size-fits-all approach as they’ve been used to in the past.

James Tenser
BrainTrust
While this last mile study is academic in its approach, grocers should welcome its analysis, especially the way it defines “fulfillment convenience.” Number one key insight for me: Shoppers will choose among order pickup options based on their priorities in each instance. That means there is no one best way for grocers to make digital orders available. Whether a store-picked grocery order is delivered, collected inside the store, accessed from a locker, or walked outside by an employee to the shopper’s vehicle, it must be “staged” somewhere on the premises first. This, for me, is the least-developed area of business practice for digital grocery shopping. I’d add another observation about the unsubstantiated belief that in-store pickup will cause shoppers to add impulse items to their baskets. This is applying 1960s behavior assumptions to 2020s shoppers. Yes, some shoppers might add a few items, but at the cost of erasing the convenience of ordering online in the first place. I would argue that such encounters are actually the worst of both worlds for shoppers because they… Read more »
FrankKochenash
Guest

I suspect there are physical infrastructural constraints affecting grocers’ abilities to offer (and promote) these services. To do curbside pickup at scale, a store needs suitable, available curbs. An available curb means a curb that doesn’t impede in-store visitors. To do lockers, it needs lockers and suitable space to locate them. A grocer also needs the user tools to facilitate in-store picking and the labor to do it. To the extent any of these are real constraints, grocers are correct to carefully match demand generation to their ability to delivery a great service.

John Karolefski
BrainTrust

The decision on what to offer shoppers should be made on what shoppers prefer or want. What they want during COVID will change when the virus is vanquished. Time-pressures aside, my hunch is that most people will go back to their former shopping habits.

Craig Sundstrom
Guest

I could go on a rant about how this is another study by some academic who doesn’t actually run a grocery (but then neither do I) but I won’t (since I didn’t fully read the full paper).

However, I will note the word “sales” appeared in it several times but “profit” seemingly not at all; that makes a difference in how one views things.

storewanderer
Guest
7 months 12 days ago

Profitability will be addressed by price increases. The question is how they will do this — start adding service fees (maybe they think doing that will push some customers to abandon these services and walk into the store and pick their own items again) or just modify pricing scales across the board to account for the increased overhead costs of providing these services.

Cathy Hotka
BrainTrust

Retailers: you can figure out the financials later. Now is the time to listen to customers and give them the socially-distanced experience they desire. If you’re there for them, they’ll be there for you.

Jeff Hall
BrainTrust

Grocers definitely need to be offering BOPIS, curbside pickup and locker pickup, where the market dynamics, staffing and physical space allows, or risk having a meaningful share of their customer base start to go elsewhere. I would take this even one step further, in that a growing share of grocery consumers are starting to expect home delivery as an option, and we don’t see this behavior changing post-pandemic.

storewanderer
Guest
7 months 12 days ago
The grocers are definitely short changing opportunities around curbside pickup and standalone lockers. It is a cost issue. This is why it took as long as it did to roll out. These services have never made the grocers any money — the argument was always it costs too much labor to do this. The entire pick-up situation is a cost issue. It is labor intensive, there are food safety concerns, in a very low margin business. The pandemic forced large chains and regional chains to either “put up” and actually offer these services and scale them up, or lose significant volume. Independent grocers are even offering these services in some cases now, thanks to softwares made available through their wholesalers integrated into the inventory/point of sale systems. At some point the profitability situation with these services will need to be addressed. Short term, I suppose they could just increase pricing across the board and the in-store shoppers pay the same prices as pick up shoppers getting free pick-up to subsidize the cost of the pick-up… Read more »
Casey Craig
BrainTrust

Curbside pick-up has become an important element for online shopping, especially in the grocery space. As it continues to expand, grocers should consider the various ways they can help their customers pick-up their products. The different tactics listed here can help meet the various needs customers have, but in addition to flexible pick-up options, grocers also need to address inventory management — providing consumers and employees with a better real-time view of what’s available where. This will help relieve friction with customers who order online only to find out a product is no longer available and will now need to be substituted.

Whether it’s flexibility in how to pick up their products or providing better visibility into inventory resulting in fewer substitutions for BOPIS customers, these investments will benefit the grocer in the long-run. There may be some overhead costs on these functions now, but companies should see them as investments because I don’t think pick-up functions are going anywhere any time soon.