Detailing the Retail Landscape

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Detailing the Retail Landscape

By Molly Strzelecki - 01/01/2014

Responding to demand for a quick and convenient shopping experience, many retailers are rolling out a "click-and-collect" shopping model that allows shoppers to make their grocery purchases online and then pick up their wares at a designated location. The concept, which has proven mightily successful in European markets (Tesco and Asda, for example, have been doing bustling business in this area), is now making its way to U.S. retailers.

Peapod Pick Up sites, like this one in Palatine, Ill. offer another option for consumers alongside home delivery. In five minutes or less, an associate greets you at your car, collects your coupons and loads your groceries into your vehicle for you.

While it's not quite as convenient as the unmanned drones Amazon promises in the future, the idea of buying products online and picking them up in store, or at curbside, is one that is hitting a mark with busy shoppers.



"Consumers are getting more demanding. They have come to expect not only instant gratification, but hyper-convenience."

– Ann Mack,

JWT


"Consumers are getting more demanding," says Ann Mack, director of trendspotting for New York-based agency J. Walter Thompson (JWT). "They have come to expect not only instant gratification, but hyper-convenience. As a result, they are coming to expect a seamless experience across channels and platforms. Click-and-collect is one of the ways retailers are providing that."

Good for Me, Good for You

Click-and-collect provides a valuable resource for consumers, certainly. Not only is it a timesaver, notes Bill Bishop, chief architect of Barrington, Ill.-based Brick Meets Click, as shoppers don't have to physically push a cart up and down a store aisle for products, but it's also a time shifter–an aspect that a lot of consumers like and appreciate.



"The time-shifting ability to shop online is one of the most important soft benefits associated with click-and-collect."

– Bill Bishop,

Click Meets Brick


"The time-shifting ability to shop online is one of the most important soft benefits associated with click-and-collect," he says. "It allows consumers to shift when they make decisions about purchases to a time when they can be more deliberate about it. Instead of having to make a decision while they're pushing the cart, they can make decisions at 10 o'clock at night while they're watching the news."

But lest it seem that all of the benefits of click-and-collect favor the consumer, there is an upside for the retailers employing this added service as well.

"For retailers, it provides them yet another way to appeal to today's time-strapped, in-control consumer," explains JWT's Mack. "This is especially important given the challenges that face many retailers, notably the ongoing battle to get consumers spending, the rising price of commodities and the new specter of showrooming, or using physical stores to discover or assess goods, then ordering them from cheaper online outlets."

And if a retailer can get a consumer interested in the store's products, there's a good chance that dollars will follow. The challenge for retailers is being an early adopter of new-to-use services that consumers are clamoring for.

"Retailers who offer this service to consumers first will benefit far and away the most," explains Bishop. Studies show that when a new amenity such as click-and-collect comes to market, there are always those who have been longing for just such a service, he says. Those shoppers will flock to the first retailer who offers it, and as click-and-collect is a relatively virgin market in the U.S., the first retailer in line will get the bulk of those consumer dollars.

If a retailer is second or third to market with the service, however, that doesn't mean it's a lost cause. Sure, the financial incentive is much lower but at that point, says Bishop, "You're then in a 'defend-your-business' mode. So it becomes a question of: Are you going to make more profit by leaving the service to your competitors or by doing it less profitably?"

Besides a financial incentive, click-and-collect can foster a bond for retailers with convenience-seeking consumers.

"A lot of retailers have the philosophy that they already have the store, and they are trying to further their relationship with consumers to revolve around the store," says Anne Zybowski, vice president of retail insight for Boston-based Kantar Retail.

"Getting a delivery to the store is a lot cheaper than delivering it to someone's home," Zybowski explains. "So most retailers who have a strong online business that is heavily weighted toward picking items up in-store can set up a financial incentive so that shoppers who don't want to pay for shipping will come to the store and pick up their orders instead."

What I Like (to Know) About You

Buying online and picking up in-store lets consumers shop at the touch of a button (or rather, keyboard), and grab their groceries from stores without so much as a hey, how do you do. But while satisfied customers happily drive away after spending only mere minutes in the store, or idling curbside, retailers still need to know who their customer is, and what he or she wants.

Fortunately, click-and-collect technology is ready and able to give them just such insight. For example, says Brick Meets Click's Bishop, it allows retailers to see how predictable a family or household's orders are.

"So the first thing you can see by household is what their routine pattern of purchases looks like," Bishop notes. "And it allows you–if you choose to do it–to infer quite a lot about what that household does. Are they buying products that are more health-oriented? Are they buying a lot of products that are geared for teenagers? As this area grows, retailers could then characterize some purchases by households, and then segment them by pattern."

One thing to be cautious about, he adds, is that offering consumers a buy online, pick up in-store option means that retailers must make sure the inventory is available.

"Click-and-collect will hit store inventories harder," Bishop says. "And retailers need to think about how they can support click-and-collect order selection in addition to their regular business, and how they will have to refill the inventory at their store."

With that in mind, click-and-collect could heavily influence what and how much retailers stock of certain products. And with the emphasis placed on convenience, less might mean more. Bishop cites California-based Yummy.com, which bills itself as a neighborhood grocery store that delivers within 30 minutes. The comparatively small stores–about 5,000 square feet–stock only 3,000 to 4,000 items versus the typical 30,000 items a full-sized store might offer.

"They built the stores in this way so they can be an efficient place to select products," Bishop explains. "One of the things most people don't appreciate is that the inefficiency of an order traces primarily to how far you have to go in between selecting items." Selecting your order from 30,000 items is a challenge, but considering only 3,000 items takes much less time to assemble an order.

"[Click-and-collect] will change retail business," Bishop says, "in that consumer packaged goods are going to work with more abbreviated assortments like Yummy does. They can automate selection of the store to increase efficiency."

Additionally, the model will affect how retailers market and promote products. If consumers don't even have to enter a store to get their groceries, for example, gone are the impulse buys that come while perusing the aisles or waiting in the checkout line.

To combat this, retailers must target solution selling, Bishop says. The bonus is that online cross-promotion is a lot less labor-intensive than a physical in-store cross promotion.

"Retailers don't have to move all of the products to one place in the store, pick them up and move them, and take into account and figure out how to promote together those products that are refrigerated, or frozen, while others are shelf stable," he notes.

Additionally, an uptick in the use of digital coupons is to be expected, a promotion that obviously and easily lends itself to online shopping.

But, as Kantar's Zybowski notes, whether shopping in-store or online, the key is for retailers to know the customers they are serving, and how that customer likes to shop. Consumers, she notes, expect to save on two things: money and time.

"There are times when shoppers want to explore, and times when they just want to get in and out as quickly as possible. Online shopping helps tremendously both on a replenishment basis as well as driving impulse," she says. Most online grocery purchases tend to be twice a month, Zybowski continues, and they tend to be "stock up" trips.

Those who grocery shop online, she says, generally fall into two camps–those who do so to better stick to a budget, and those who do so because it's easier and they like to take as much time as they want to explore their options.

"At the core of it, you can't really change a shopper's mode," Zybowski says. "Retailers need to understand that sometimes shoppers may be interested in being inspired; other times they are just getting what they need. But retailers need to provide both opportunities for shoppers."

Click, Collect and Beyond

Right now, click-and-collect is a relatively new model to American markets. But as the concept grows, retailers can take a cue from their European counterparts on how to make the service both functional and profitable.

In the U.S., some retailers are already testing the concept. Zybowski points to Deerfield, Ill.-based Walgreens, for example, which offers an intriguing model for customers to buy online and pick up in stores. "They've thought about in-store pickup from both a labor and a real estate perspective," Zybowski explains, noting that the retailer commandeered part of its photo department to make room for items that consumers want to pick up in-store. Additionally, some retailers are test-driving concepts that save consumers from even visiting the store. Amazon is testing Amazon Locker, a program that allows consumers to have items shipped to a metal "locker" of their selection and available for pickup. In New York City, lockers are located in convenient spots like parking garages, convenience and drug stores. The program is currently available in Seattle, New York, northern California and near Washington D.C.

French retailer Auchan is testing a concept that does away with stores completely, Zybowski adds. Shoppers order online, and then meet a delivery truck at a designated time and place.

Online grocer Peapod also is test marketing drive-thru pickup in Chicago, giving consumers the option to shop and pick up conveniently, saving the delivery fee.

"In a click-and-collect environment, not having stores is just fundamentally streamlining the process. Whether it's a drive-up location that is permanent, meeting a delivery truck or another option yet to be determined," Zybowski notes, "it's surrounded by the idea of helping deliver convenience."

And for those busy shoppers who would avoid stepping foot in stores as much as possible, they'll take all of the convenience they can get.

Molly Strzelecki is a freelance writer living in Chicago. She has been covering trends in the consumer packaged goods industry for more than a decade.