Talking Shop: Can Click and Collect Challenge Amazon?
WHY YOU SHOULD CARE
More retailers are offering buy online, pick up in store (BOPUS) options to compete with Amazon. But they’ll need to iron out some growing wrinkles first.
On my way home from work one evening, I stopped by my local Target to pick up a few things. Normally, the prospect of going to any big-box store — especially after a long day at work — is hellish. But this time was different. Earlier that day, I placed my order for conditioner, a new shower caddy and some coconut oil, among other things, on the Target app, and selected the “pick up at store” option, hoping for an expedited experience. When I arrived, not a single other customer was in line to pick up their order. Still, I had to wait because the order pick-up counter is the same as the customer service counter and someone was making a return. Once I gave them my name, they had to radio an employee to retrieve it from storage, which took about five minutes. The experience was much faster than a normal shopping trip, but overall, not nearly as quick or convenient as I would like.
Despite evidence to the contrary at my local Target that evening, the option to buy online and pick up in store (BOPUS) is becoming increasingly popular throughout the U.S. More and more American retailers are turning to BOPUS options to pull customers away from Amazon, saving them the hassle of physically shopping while still getting them their order within a few hours. It’s far from a fail-safe cure for companies and customers, yet both are buying into it.
More than 90 percent of U.S. retailers are expected to offer BOPUS services by 2021, according to a survey by retail solutions firm Zebra, and an April 2018 study showed that 66 percent of shoppers had used BOPUS in the previous six months. Companies are also innovating to keep up. Walmart now offers 24/7 BOPUS services and discounted prices on BOPUS-eligible products. In September 2017, Target opened its 1,000th online grocery pickup location.
In the U.S., the number of BOPUS — also known as “click and collect” — orders went up by 47 percent this past holiday season, compared to the previous year, according to digital firm Adobe. The model threatens to fundamentally disrupt the last-mile delivery market, expected to be worth $65 billion by 2023 on the basis of the current demand for e-commerce. And the scope for BOPUS’s growth is immense. Only 27.5 percent of American retailers offered BOPUS in 2018, compared to 64 percent in the U.K., 50 percent in France and 43 percent in Germany and Austria, according to a survey released in January by OrderDynamics, a retail order management technology company.
For sure, there’s evidence of challenges retailers and consumers are confronting with BOPUS. Retailers are risking a rise in fraud by not requiring shoppers to provide ID or credit cards when they pick up their orders. Some retailers have seen their chargeback rate (when a credit card provider demands reimbursement from a retailer for a fraudulent transaction) on BOPUS orders increase to 29 percent, according to a client data analysis by fraud prevention company, Chargebacks911. Many stores have also found it difficult to ensure they have products in stock when customers order online and pick up in-store. OrderDynamics found that basic inventory visibility decreased by 31.2 percent in 2018, compared to 2017, for more than 750 U.S. retailers. Customers have suffered long lines, no parking spots or entirely misplaced orders. In a 2017 survey, only 31.6 percent of consumers described collecting an online order in the store as a “smooth” process, compared to 66 percent for online shopping.
Competing is the most important thing [for retailers].
Monica Eaton-Cardone, co-founder, Chargebacks911
Still, click and collect has only grown since that survey, suggesting that the model is successfully carving out a growing niche for itself. It’s also making Amazon adapt. To retain and expand its empire, the digital giant has been creating more physical locations, with nine Amazon Go stores throughout Seattle, San Francisco and Chicago.
The reason behind the rise of click and collect is threefold, according to OrderDynamics data. First, BOPUS customers are after instant gratification. They can find the product they want and have it in their hands the same day. It also gives them control. “With BOPUS, the shopper gets to choose when they drop by the store for a pickup, [and they know] exactly when it is going to arrive, unlike deliveries,” says Charles Dimov, vice president of marketing for OrderDynamics. “It also ensures their delivered item isn’t open to ‘porch piracy,’ which has become a growing concern.”
Finally, the increasing demand for experience-based retail is an important driver of BOPUS, suggests a 2017 survey by JDA, the Scottsdale, Arizona-based software and consultancy company. The study found that 54 percent of Americans prefer to shop in-store — as long as it’s convenient. That’s the target audience BOPUS offerings cater to. “Hardware stores are an excellent example of this,” Dimov says. “I might buy that new drill but I appreciate speaking with an expert about the right parts and approach to a project during an item collection.”
Actually making BOPUS work though has proven complicated. After receiving repeated fraudulent purchases in her online store, Monica Eaton-Cardone in 2011 co-founded Chargebacks911 to help mitigate fraudulent charges for online merchants by predicting chargeback threats. “BOPUS creates a lot of loopholes for fraud,” she says. To avoid upsetting customers who’ve forgotten their ID or credit card when they come to pick up their orders, many stores simply don’t seek this documentation from them. “Competing is the most important thing [for retailers],” says Eaton-Cardone. One way to fix this might be to refuse BOPUS pickups beyond a certain distance from the zip code associated with the credit card, she says.
For customers, the uncertainty of whether the store will actually have your order in stock can serve as a deterrent. “Providing retail inventory visibility in real-time is a very difficult feat,” says Dimov.
Some, like Allen Adamson, co-founder of marketing firm Metaforce, and a business adjunct professor at New York University’s Stern School of Business, argue that BOPUS isn’t worth it for retailers or customers. “If you still have to get in line, wait for your order and you can’t even get a parking spot,” says Adamson, “it ends up doing more damage than good for the brand.” Adamson’s wild idea? Retailers should focus on instant deliveries, and have specialists visit the customer’s home and set up the furniture or electronics that have been purchased, for a small fee. “They should provide an in-home customer experience that Amazon can’t compete with,” says Adamson. Some retailers are trying to do at least the first part of what Adamson proposes. Target acquired delivery startup Shipt in 2017 and provides one-hour delivery for certain locations and Walmart began their grocery delivery service in March of 2018 — just after Amazon announced its purchase of Whole Foods. And a few startups are going the whole way with Adamson’s prescription. Silicon Valley-based Deliv delivers your groceries and also puts them away in your fridge.
But for major retailers, providing services like that will take time and money, and they need a way to compete with Amazon now. Between 2006 and 2016, Sears, J.C. Penney, Macy’s and Best Buy lost more than 50 percent of their market value, and Target dropped more than 20 percent, according to Yahoo and Google Finance. Meanwhile, Amazon increased its market value by 1,934 percent. And for the foreseeable future, BOPUS seems the answer — even with its limitations. Target reported that store pickup and drive-up purchases went up by 60 percent in November and December over the same period in 2017, and these sales accounted for a quarter of the company’s digital sales those two months.
Ultimately, Eaton-Cardone predicts our smart home devices will know our food preferences, and when we’re out of things it will auto-order our groceries for us. But for those wanting the experience of convenient shopping, BOPUS might remain the best bet. That’s if BOPUS stores can up their game.