The Buy Online, Pick-Up In-Store Wars

Discussion
Dec 01, 2010
Tom Ryan

By Tom Ryan

Mimicking the pizza delivery wars of the eighties, retail turf
battles are occurring in the "Buy Online, Pick-Up In-Store” arena,
according to Kurt Salmon Associates. The need for turnaround speed comes as
several retailers report that 40 percent of their online purchases are being
picked up in-store.

On the one hand, the push is for shortest turnaround times.
The average promised turn time is two hours, according to KSA. But Best Buy
recently reduced its turnaround guarantee to 45 minutes. Lowe’s just
cut its turnaround time to 20 minutes. Still, some retailers’ guarantees
remain within four hours.

Wait time is also critical at the pickup counter.
Sears hands out $5.00 coupons if it takes longer than five minutes for a customer
to get their order once they reach the store.

"Once the offering is ubiquitous, speed will be the killer app," said
Noam Paransky, a retail strategist at Kurt Salmon Associates, in an interview
with RetailWire.

For the most part, he said, the performance has been good.

"Sears posts
a board when you arrive at the pick-up counter that shows how long you (and
others) have been waiting (by last name) and shows their previous day and previous
month performance relative to their 5 minute promise," said
Mr. Paransky. "We recently shopped a store that was at 100 percent the
previous day and 98 percent the previous month. We received our order at the
counter in 53 seconds."

But the required functionality can be challenging
during peak shopping times. Some inventory listed may already be in customers’ shopping
carts and result in angry consumers at the pick-up counter. Under-reporting
inventory will risk unsold merchandise on the shelf. Walmart recently suffered
a service failure where they offered items that were part of a limited stock,
doorbuster promotion.

"Some shoppers had items sell out in the midst of their online checkout," said
Mr. Paransky. "Others received order confirmations only to find out later
that the item was no longer available when they went to pick it up and were
offered instead what consumers thought was an inferior substitute."

Mr.
Paransky said tight inventory management and a near real-time inventory feed
to the web store is critical for reducing the likelihood of service failures.
He believes pick-up confirmations shouldn’t be sent out until the order is
complete and waiting at the pick-up counter.

"Nothing related to this service appears to create ‘customers gone
wild’ more than coming into the store to find out their order cannot be
satisfied after being told otherwise," said Mr. Paransky.

But he said retailers
will particularly benefit if they can effectively encourage a second in-store
visit at the time of pick-up. He also expects the service will continue to
grow since consumers are clearly enjoying the convenience.

"Consumers want instant gratification," said Mr. Paransky.

Discussion
Questions: What challenges will retailers encounter as "Buy
Online, Pick-Up In-Store” becomes more pervasive? What logistical as
well as in-store operational issues will likely crop up?

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19 Comments on "The Buy Online, Pick-Up In-Store Wars"


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David Biernbaum
Guest
10 years 5 months ago

In my opinion the “buy on-line, pick up at the store” concept will grow much larger before it eventually burns itself out and goes away the same as the pizza delivery wars of the the 1980’s. Consumers crave speed and convenience however the “pick up” experience is often anything but speedy or convenient. UPS doesn’t need to worry because ship-to-my-door will soon become the preference again for most consumers.

Paula Rosenblum
Guest
10 years 5 months ago

Buy online pick up in store is great for instant gratification. But as free shipping programs like Amazon Prime continue to proliferate, it will cap off. After all, the customer still has to wade through traffic to get to the store.

Them it’ll be just another variant of an impulse purchase.

Bob Phibbs
Guest
10 years 5 months ago

I still don’t get the buzz around this–it’s just a catalog desk–yes? And yet again we find that great retailer, the one everyone is dying to learn from–Sears–being seen as the pioneer. With the chances of this going completely wrong, I don’t get the appeal for anyone.

Steve Montgomery
Guest
10 years 5 months ago
As has been pointed out several times in these discussions, consumers do a lot of their research online. The “buy online, pick up at the store” concept is a natural extension of that process as is the ship to my home concept. For the former, I agree that is would a wise decision to not issue a confirmation until the item was actually at the pickup desk. Both concepts have plus and minuses. Regardless of how fast you can do it, picking up at the store means you actually have to go there to get the item(s) you purchased (assuming they have it in stock). This involves all the elements of any trip to the store. Shipping to the house has the shipping delay issue, which can range from overnight to several days. In addition, depending on what the item(s) is and your schedule may mean something valuable will be left on your doorstep and vulnerable to theft and the weather. Which the consumer selects will be driven personal preference but having the choice is… Read more »
W. Frank Dell II
Guest
10 years 5 months ago

This blending of the store and online business model seems to have little customer benefit. Online products should have a lower price and free shipping. For this you have to wait a day or two. If I am spending gas money and my own time to drive to the store, what do I need online for? I can see placing my deli order online and not having to wait at the counter during my shopping trip. I can see reserving a product for 24 hours for store purchase, but going to the store with either a confirmation or reservation and not walking out with the product would likely be my last trip to that store.

Remember nothing hurt Bradlee’s more that being out-of-stock of their advertised specials. Consumers simply crossed the store off their list.

Ryan Mathews
Guest
10 years 5 months ago

I agree with a great deal of what’s been said. The other caveat here is that as these kinds of programs grow in popularity, it gets harder and harder to make them work operationally. Lines get longer at stores, there are bound to be some out-of-stock issues created by lags in computerized inventory reporting times, etc.

The bottom line is still that consumers are enjoying the notion of increasing shopping options and retailers seem convinced that their survival depends on increasing those options despite the cost or risk.

Nikki Baird
Guest
Nikki Baird
10 years 5 months ago

Until we have Star Trek-like transporter technology, buy online/pick-up in store is going to continue to be an important part of instant gratification. But retailers need to have two critically important things: up-to-date, accurate inventory in stores, and a way for store employees to contact customers directly to let them know if something goes awry before they get to the store–consumers will forgive a lot of screw-ups, as long as the retailer is proactive about letting them know.

It won’t be a differentiator for long, that’s for sure.

Susan Rider
Guest
Susan Rider
10 years 5 months ago

This will be a balancing act, especially with hot, hard-to-find products. Keeping the consumer happy will be a real issue. It’s a convenience that will need to be managed and marketing collaboration on special sales, seasonal hard-to-find items, and special conditional sales will be imperative. Ho Ho Ho, retail marketing has never been easy and with all the different technology today, it has become even more complex!

Bill Emerson
Guest
Bill Emerson
10 years 5 months ago

On one level, this is no different than any form of advertising. The biggest risk is to show availability of a product (like an ad) and then be out of stock when the customer comes to the store. For an ad, it’s implicit, online it is essentially explicit. Disappointing a customer who comes in expecting to find the product is probably the biggest loyalty killer for any retailer. The idea of not confirming the sale until the product is secured in the store is a very good one.

The complexity here has always been going from managing internet inventory levels in one central location to managing this same inventory across multiple locations. While there are very sophisticated systems to do this, increases in inventory levels and working capital requirements are guaranteed.

Fabien Tiburce
Guest
Fabien Tiburce
10 years 5 months ago
“Buy online and pick-up at the stores” makes a lot of sense to me. In fact, that’s how I tend to buy certain goods such as electronic and computer equipment. Why? I buy online mostly for reviews and the ability to compare specs. I wouldn’t necessarily buy everything online but technical products (printers, monitors, etc…) lend themselves well to this type of purchasing. Then you’d think I would just want to take advantage of the free shipping right? That’s what I used to think! Doesn’t work for me. Either we are not home or we are home and don’t hear the door bell (yes, this has happened a number of times…apparently a two year old makes more noise than a door bell). I end up having to drive to some industrial distribution center far from home to pick up my parcel (if the parcel is not still in the truck by then). Frankly, I have found that home delivery to be a false sense of convenience. It sure isn’t convenient for me and I would… Read more »
Camille P. Schuster, PhD.
Guest
10 years 5 months ago

Consumers have different lifestyles so some prefer home delivery, some want to pick it up, some like to shop. However, when any of these consumers are promised items, they expect to get them. Whatever the retailers promise, e.g., 5 minute fulfillment, 2 day delivery, or in stock to retrieve after paying, consumers expect to have happen.

When making these promises retailers face two pressures: (1) to keep up with the competition and (2) manage inventory and information to fulfill the promise to the consumer. Do not make a promise that you can not deliver. Disappointing consumers is a good way to lose their business.

Bill Hanifin
Guest
10 years 5 months ago

If I were the retailer, I would not advertise any item that was a doorbuster or on similar special, nor would I include items that are subject to stock-outages. With just a bit of selectivity, a host of potential customer disappointments could be avoided.

Also, similar to the way we pick up prescriptions at the pharmacy, why not let the customer know that her order will be “ready anytime after 2 pm,” thereby making wait times effectively “zero” when arriving in store.

Lastly, I think retailers outsmart themselves when striving to serve the instant gratification need of customers. Make service quick and responsive but don’t set up unreasonable deadlines that open the door to poor customer experience.

Marge Laney
Guest
10 years 5 months ago
Being able to buy online and pick up in the nearest store is just another part of the ‘oneline’ world that we live in. As we move seamlessly online to offline we expect the experience to be at minimum, efficient. Executing this strategy like any other is challenging and fraught with problems. The comment in this article that I found most interesting was, “…retailers will particularly benefit if they can effectively encourage a second in-store visit at the time of pick-up.” I agree that if the pickup customer can be engaged and shown additional items that might complement their purchase, it’s a huge win for the retailer. According to a survey released by ICC and sited in today’s WWD, “Retailers are missing out on opportunities to build market share because they’re failing to convert visitors into buyers.” The article further states that “In many cases, business is lost because consumers weren’t ‘upsold’ on purchasing opportunities.” The pickup customer is prime for add-on because they made the trip and are in the store completing a purchase.… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
10 years 5 months ago

Like many other things in retail, the devil’s in the details. It’s a great offering, from a marketing perspective, but I just question whether most major retailers have the operational execution to back it up. There are simply too many stores still struggling to maintain in-stock positions, especially with leaner overall inventory levels.

It won’t take too many wasted trips to pick up an online purchase before customers give up on the option altogether.

Robert Heiblim
Guest
Robert Heiblim
10 years 5 months ago

Like other posters here, I agree that this is a natural consequence of online shopping and a clear benefit for many consumers. On the other hand, it has severe limits in brick and mortar deployments as it then requires enough inventory to spread across the store base. This is much more difficult than shipping from DCs. As well, this limits the number of SKUs and price offers as many “value” offers which are strong online are the results of closeouts or end runs. This means that we will continue to see the spread of offers online and off and no store pickup can counter that specifically.

Due to that, this is NOT the killer feature but rather a good one for customer service that should encourage store visits. The question then is how to merchandise to that opportunity.

James Tenser
Guest
10 years 5 months ago
In a multi-channel shopping world, each shopper will naturally assemble his or her own best method for each purchase occasion. Sometimes search convenience is more important than speed of acquisition of the item. Other times getting the item as soon as possible takes precedence over all other criteria, including price. For some Walmart shoppers, the preference of paying with cash is paramount. For some Kmart shoppers it may be the lay-away option. For some Best Buy shoppers, the certainty that an ordered item is waiting at the pickup desk may be very important. For some Amazon shoppers what matters most is the freedom from rubbing shoulders with shoppers at Walmart, Kmart or Best Buy–or maybe just avoiding their parking lots. To reiterate, shopper convenience is not a single construct but a set, and individuals will seek the balance among them. Many retailers correctly reason that they must offer an preorder-online pickup-in-store (POPU) option to satisfy a certain percentage of purchase occasions. This is therefore not a basis for differentiation. Applied with some common-sense principles (never… Read more »
Rob Stocks
Guest
Rob Stocks
10 years 5 months ago

Most of our smaller or regional customers are doing Pick up in store with good results. Nothing at the level of 2 hour turn-around mind you, but nevertheless it is a popular option.

Why do customers like this? Because they save the shipping costs (if there are any), lineups at the store, and the uncertainty of delivery schedule. Just ask my friend who had to wait 3 days before her makeup was re-delivered after the driver tried to buzz into her building while she was in the shower.

Pick up in store is here to stay. It will not be a point of differentiation but an expectation.

Ralph Jacobson
Guest
10 years 5 months ago

Today’s consumer wants more choice and control of the shopping experience. When this is convenient for the particular shopping “mission” the individual has for the moment, the program works…. When the retailer delivers on the product fulfillment challenges. Will this be the greater process for the majority of consumers? Not in the near future. It works for me, though…sometimes.

Sujatha Shanmugam
Guest
Sujatha Shanmugam
10 years 5 months ago

Buy online, pick up in-store is here to stay. Whichever way the retailers offer the cheapest/most convenient option, this certainly adds a variety of service possibilities to customers.

Per popular belief, in-store pickup is looked upon as an alternate to home delivery/shipping services. That may be true only in cases of poor shipping service.

I see this option purely as a complementary service to the range of services offered to customer.

As a consumer, I have enjoyed buy online, pick up in-store when I didn’t have much time to wait and my whole logic for going with this option is the guarantee of being in stock when I go to pick up the item. Nevertheless, I did compare the price difference too! I also have used home shipping service when I literally couldn’t step out into the chilly Minneapolis weather.

Hence my view is having a service option for every situation helps in a customer-centric retail world.

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