(Reuters) – As retail casualties, such as Sears or Toys ‘R’ Us kept piling up, expensive real estate often got the blame for the traditional retailers are struggling to keep up with e-commerce rivals.
People are waiting in line to shop at Best Buy during an event on Thanksgiving day in Westbury, New York, united states, November 22, 2018. REUTERS/Shannon Stapleton
Last U.S. holiday shopping season showed shops can offer retailers a rare competitive advantage as they scramble to fend off the challenge from e-commerce giant Amazon.com and other online retailers.
The sale where customers order goods online and pick them up at a nearby store increased by 47 percent in November and December compared with a year earlier, exceeds 16.5 percent growth in online sales, according to Adobe Analytics.
Under this reporting big increases in sales, chains such as Best Buy Co Inc, Target Corp, Walmart Inc and Home Depot Inc.
The experience of the 2017 holiday season when bad weather and a late increase in online orders overwhelmed shipping companies and led to delays is likely to have contributed to the increase in store pickups last season, retail experts say.
But even if UPS and FedEx are largely avoided a repeat of such problems, analysts say shop pickups, when handled right, offer enough benefits for consumers and retailers to keep gaining in importance.
The numbers bear that out. According to retail research and consulting firm GlobalData Retail, store pickups are good for almost a third of U.S. online sales in November and December. That’s compared to about 22 percent a year earlier and slightly more than 17 percent in 2016 during the holiday season.
(Image: Click and collect growth during the holiday tmsnrt.rs/2Ep2YJW)
The method combines the advantages of the digital shopping experience…with the instant gratification of same-day store pickup and easy returns,” said Jeff Sylvester, a senior analyst with Expect, a company that studies the experience of the customer.
Shoppers, on the other hand, avoid shipping costs and the agony of waiting for the delivery, and can get help from the store personnel if there are problems.
Steve Molloy, a web designer who shuttles between Sydney, Los Angeles and San Francisco, said a 3-1/2-week delay in the delivery of a pair of Nikes he ordered online 2016 during the holiday season made him switch to in-store pick-up.
“It feels like you have a bit of control,” he said.
Retailers save on the packaging and the delivery costs if they are in the sale in their in-store backrooms, instead of a remote warehouse.
With Sylvester estimates of the costs retailers approximately $5.60 in packaging, labor and fuel to deliver goods ordered online.
Factoring in other costs, retailers are 25 percent gross profit on a shipment of $82, the size of an average online during the 2017 holiday season. The store pick-up option increases that margin of at least 33 percent, he said.
It also helps bring in additional revenue.
More than a third of the customers who come to collect their orders end up buying something else, said Tom McGee, chief executive of the International Council of Shopping Centers, a global trade association. During the holidays that number increases to 86 percent, he said.
AMERICAN retailers are a few years behind their European peers in adopting a “click-and-collect, and this has not yet reached a scale where it could pose a major challenge for Amazon, analysts say. But already, the model helps retailers to better cope with the downward pressure on the margins of the online competition.
“Buy online pick up in store is every CEO’s nirvana,” said Ted McCaffrey, a retail strategy consultant with SensorMatic, a Johnson Controls company.
The making of the work, however, takes careful planning and money.
It comes to how quickly the employee can comply with multiple orders, and if retailers can attract workers during the peak hours, since long waiting times may discourage customers who opted for the service to save time, retail consultants say.
Creating a special space for the collection also requires investment, which can be substantial, particularly in urban areas where the stores are usually smaller and real estate more expensive.
For retailers that so far have made most progress in the United States is a do-it-yourself chain Home Depot, Adobe Analytics group manager Nate Smith said.
Adobe Analytics’ data showed that the customers picked up nearly half of their online orders at Home Depot stores during the holidays of last year, and a fifth of the customers bought additional items to do.
Smith said Home Depot had converted some shops to create a separate pickup areas with lockers that customers can unlock with a government identification and an order number.
Home Depot has made no comment on the subject due to the quiet period ahead of its quarterly report.
Walmart said that it has added hundreds of pick-up towers’ in the shops, while the Victim of The ‘Pick-up’ and ‘Drive’ options ‘ in the shops grew by 60 percent during the key holiday months of last year, and accounted for a quarter of the company’s overall digital sales, the company said.
Also Best Buy told Reuters that more than 40 percent of the online sales involve in store pickup. The electronics chain also offers special parking spaces for these customers.
“Store pick-up is especially useful if 70 percent of Americans live within 15 minutes of a Best Buy store and millions of people drive past in one of our stores every day on their way to and from work,” Best Buy spokesman Jeff Shelman said.
Reporting by Nivedita Balu and Siddharth Cavale in Bengaluru; Editing by Tomasz Janowski