Never have so many retailers been so eager to incur huge technology costs and upend operations to provide a service that encourages shoppers to avoid coming to stores. Yet, that is what is happening across the nation as retailer after retailer touts the availability of home delivery services alongside click and collect, which for many conventional retailers served as their gateway to the digital age.
The shift is noteworthy because store traffic, alongside transaction size, has long been a metric retailers measured and touted as an indicator of success. However, 2018 likely will be remembered as the year store traffic became a much less reliable indicator of success due to customers’ evolving expectations of retailers’ service offering. That’s because as satisfaction grows with alternative fulfillment methods such as click and collect and home delivery the universe of physical-first shoppers from whom trips are available to be captured will inevitably decline. Market share and transaction size will matter more even as stores retain their central role in how most retailers are satisfying shoppers who opt to engage digitally.
“Stores are an incredible asset for us,” said Matt Thompson, Kroger’s Vice President of Digital Business, echoing a familiar sentiment of many retailers. The importance of stores to Kroger’s digital offering occurred in 2014 with the acquisition of Harris Teeter and its 150 store ClickList operation. Since then, Kroger has embraced click and collect and increasingly home delivery. Kroger added 40 ClickList locations in 2016, another 450 in 2017 and will add 500 more this year, according to Thompson.
“We’ve never seen a category with such rapid adoption,” he said recently at the Home Delivery World retail supply chain event. Kroger also relies on roughly 1,200 of its physical stores to fulfill home delivery orders in nearly 50 markets. “By the end of the year we will have full delivery in all of our major markets,” Thompson said.
Other retailers are moving fast to offer and expand digital methods of engagement, which are universally reported to be popular, although no publicly held grocer has yet provided meaningful customer usage metrics to substantiate such claims.
“Everything we do now is next day delivery, but we are looking to do same day quickly,” said Valery Ciarimbola, Senior Director of E-Commerce Operations with Giant Eagle, the Pittsburgh-based operator of more than 200 supermarkets. “The first three deliveries are free and then $4.95 after that. The magic number of delivery orders to keep (customers) sticky with us is five or six.”
Giant Eagle fulfills home deliveries out of 36 stores currently, has more than 50 click and collect locations branded as Curbside Express and expects to add another 20 this year, according to Ciarimbola. Applied Predictive Technologies helped Giant Eagle build a predictive model that allowed for the prioritization of locations.
At SpartanNash, the Grand Rapids, Mich.-based food company whose retail division operates 145 stores, click and collect and delivery are expanding rapidly. Matt Van Gilder, Manager of E-Commerce Operations with SpartanNash, said a click and collect service branded as Fast Lane launched last July and is now available at more than 50 stores. Orders for home delivery are fulfilled from six stores.
“We are very happy with the growth we see week over week,” Van Gilder said, noting that the service is helping capture new customers and 50 percent of sales are incremental. The incrementality is key because SpartanNash does all its own deliveries and Van Gilder concedes profitability is a challenge due to the last mile expense. “We love the benefit of owning the customer experience all the way to the end.”