Walmart expands online grocery/in-store pickup test

Discussion
Feb 11, 2015

Despite some hard-to-forget past failures (aka, Webvan), retailers continue to see online grocery as an important ingredient for catering to today’s shoppers. Some are pursuing that goal using home delivery while others have committed to in-store pickup models.

According to reports, Walmart is expanding its test of in-store pickup of groceries at three stores in Arizona, including one in Chandler and two in Mesa.

The chain offers the same option at some of its stores in its home market of Bentonville, AR as well as in Denver. Walmart prices online items the same as those in stores and there is no fee for the service, which requires a minimum order of $30. The chain also offers online ordering in San Jose, CA, but has opted for home delivery in that market.

Customers looking to purchase groceries select a four-hour window to pick up their orders. When orders are ready, the store calls them and tells them where they can go to pick up their items. Once they arrive, customers call a designated number and their order is loaded into their vehicle.

According to a May 2014 RetailWire poll, 68 percent of respondents expect store pickup to experience greater growth than home delivery for online grocery over the next five years.

Why do you think chains have moved so deliberately in rolling out online grocery with in-store pickup as an option? Do you expect the trend to accelerate, remain the same or decelerate over the next couple of years?

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17 Comments on "Walmart expands online grocery/in-store pickup test"


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Keith Anderson
Guest
7 years 3 months ago

The economics of online grocery pickup are much more attractive to store-based retailers: far fewer upfront capital requirements and avoidance of all of the complexity of operating a delivery fleet.

When more convenient delivery options are unavailable or prohibitively expensive, demand for pickup options seems to be growing.

Still, I don’t think we’ll see an online grocery market that resembles France, where pickup is the dominant model. The breakneck growth of Instacart and other models is quickly re-setting expectations for convenience.

Mark Price
Guest
Mark Price
7 years 3 months ago

Online grocery shopping with in-store pickup presents a digital, convenient option to a specific segment without all the costs associated with delivery service. The only cost associated with BOPIS (buy online, pickup in store) is headcount—little to no hard costs at all (e.g., trucks, warehouses, systems).

BOPIS is exploding across e-commerce, as consumers want same-day pickup (providing even faster gratification than traditional online purchases). This trend should increase with grocery as well, since consumers often shop at the last minute for groceries.

Herb Sorensen, Ph.D.
Guest
7 years 3 months ago

BOPIS (buy-online pickup in-store) is CRUCIAL for brick-and-mortar retailers because regardless of its particular effectiveness, it DOES drive in-store traffic. The key here is to provide surprise/delight shopping when the shopper makes their pickup IN-STORE! Of course, grab the order and go is not bad, but the convenience of the online experience is magnified by proper add-on shopping at the store.

I fear that this whole process is being too mechanically perceived by the typical “merchant-warehouseman” retailer. LOTS of opportunity for the “personal salesman” thinking retailer. Winners and losers will have BOPIS as their pivot.

Richard J. George, Ph.D.
Guest
7 years 3 months ago

Click-and-collect addresses a logistical issue and expense, namely the cost of the final mile of delivery to households with both spouses working with no one home to accept delivery, a larger concern with frozen, refrigerated and fresh merchandise.

However, I believe the real benefit of in-store pickup is the opportunity for additional unplanned, high-margin impulse purchases. Consumers use the amount of items in their shopping cart as a heuristic of their spending. Since the online items will be deposited directly into their car, they can visit the store with an empty basket. In addition, research has indicated that persons shopping both online and in-store spend more than those shopping online only and in-store only.

Europe is way ahead! The number of Europeans ordering groceries online has grown 60 percent in the past five years. Britain leads the way with 22 percent of its population ordering groceries online. In these markets the preferred delivery model is click-and-collect.

Dan Raftery
Guest
7 years 3 months ago

The concept certainly makes sense from the consumer side. For retailers, in addition to the staffing costs, the biggest operational challenges are order selection accuracy and customer compliance (i.e., showing up as scheduled). The first is controllable, but probably not completely, the second is not.

But the main reason physical retailers have “moved so deliberately” may be the technological back-end piece. While the consumer-facing components may be readily available, I’m not sure what it would take to integrate with existing supply chain systems.

David Dorf
Guest
7 years 3 months ago

Past failures like Webvan leave U.S. grocers more cautious, so U.K. grocers have taken the lead in this area. If the U.S. continues to follow the U.K.’s lead, the trend will accelerate, especially in urban areas. U.S. grocers must chose to either handle delivery and/or pickup themselves, or partner with start-ups like Instacart or even Uber. There are lots of opportunities in this area.

Peter J. Charness
Guest
7 years 3 months ago

Flat-to-low sales growth? Have to try something to boost top line.

Chris Petersen, PhD
Guest
7 years 3 months ago

Too early to tell how the click-and-collect model will work in the U.S. There are not enough markets yet to evaluate consumer response.

As others have pointed out, BOPIS is the most cost effective way brick-and-mortar retailers can approach omni-channel. Store traffic is flat or even declining at Walmart stores. So this could be an effective strategy for Walmart that does 50 percent of their business in groceries and consumables.

In the Walmart tests, there is no charge for the BOPIS service. But there is a significant labor cost as this model is scaled. Once a charge-for-service model is in place, consumers will then vote with their wallets/plastic on the benefits of BOPIS vs. home delivery. The final vote might be for both, depending on the customer’s circumstances on a given day.

Gordon Arnold
Guest
7 years 3 months ago

There are several stubborn obstacles in the design and build of groceries-to-go. The first area of opportunity is in the e-commerce software which is unfriendly to the consumer, the merchant and operations. Nobody is thinking this through from all perspectives. The second obstacle is the pay and pickup aspect of this market. Most stores are refusing to acknowledge the need for leasehold improvements and point-of-sale improvements that will accommodate the market expectations.

Once again the market development and exploitation is seemingly stifled by executive decisions made with little or no current consumer intelligence. What we are experiencing is the culmination of corporate separatism in the quest for autonomous authority over new business development. Top executives and the board of directors in many companies are demonstrating a lack of assessment skills in selecting leaders that see themselves as members of a single corporate team and not the owners/builders of one. A close look into the failures-to-date makes for very interesting reading.

W. Frank Dell II, CMC
Guest
7 years 3 months ago

For online grocery to be mainstream it must be home delivered and at retail prices. Following our Direct Product Profit work, after the shelf is stocked the only remaining cost is checkout. If you add home delivery to the accumulated costs the majority of transactions will not be profitable. Even with store pickup, the store selection and checkout added to the accumulated costs results in a profitable transaction. It is for this reason retailers are moving to store pickup. On the positive side the retailer does not lose the sales. On the negative side the consumer does not come into the store so there are some lost sales. On a purely defensive play, retailers will expand store pickup over the next few years.

Ed Dunn
Guest
7 years 3 months ago

WebVan was a dot-com failure created by hype while PeaPod started around the same time WebVan did and PeaPod is still in operation today. The common challenge I see over and over is not hiring new resources to fulfill BOPIS. Instead, retailers are trying to leverage existing employees to operate as pickers and packers who were originally hired to serve in-store customers.

Vahe Katros
Guest
Vahe Katros
7 years 3 months ago

Walmart is Walmart. They have a culture of leadership and an imperative to grow, they must be in this arena because they cannot afford to miss the boat. With their resources and talent (including the Silicon Valley labs), BOPIS just got real.

Shep Hyken
Guest
7 years 3 months ago

This is all about customer convenience. Get customers used to the convenience and service you offer (provided they like it) and they will keep coming back. The goal is to make it easier to do business with you over the competition. That is why services such as ordering online for store pickup is catching on.

That said, the store must find ways to connect with their customers at another level. Keep in mind that while some customers will shop a store for additional items, a quick store pick-up means a lost opportunity to connect with the people inside your store.

Gib Bassett
Guest
7 years 3 months ago
Offering such a service seems to be a “no brainer” if it can be done cost effectively. I think convenience is as much a purchase factor as price or brand affinity. Where it gets interesting is in the implementation. As more grocery and other retailers move to offer this service, it will be harder to differentiate. It’s also quite possible that like multiple interaction channels, customers will prefer some degree of choice when using a click to pick up service. Consider products like fresh produce that shoppers tend to like to personally inspect before buying. I can imagine a blended service where a portion of your market basket is pre-populated with often bought packaged goods, that you then can add to if you wish at the time of pick up. Making that work smoothly in a typical store environment is probably challenging but would fit better with the nature of today’s buyers. Other ideas you can layer onto this scenario are personalized offers for products you didn’t consider on your list at the time of… Read more »
Lee Kent
Guest
7 years 3 months ago

I would have simply passed here and given my 2 cents to Shep Hyken but, he got one thing wrong, IMHO. Since when do grocers connect with their customers in the store? Especially Walmart?

The BOPIS service gives grocers a much needed opportunity like never before. The grocer can actually connect with the customer. Speak to them, mention that a new shipment of fresh produce is expected on Thursday, whatever.

A golden opportunity with the potential of a truly loyal customer. A win-win for both parties.

And that’s my 2 cents.

Dennis Armbruster
Guest
Dennis Armbruster
7 years 3 months ago
I’d expect the trend of in-store pickup to accelerate as time passes. A recent LoyaltyOne survey of 1,000 American consumers nationwide reveals that consumers, especially in certain segments, are eager to shop online and reap the convenience and shipping savings of in-store pickup. Among the findings: 38% of consumers indicate that they simply don’t want to wait for their purchases to be delivered, and would pick up in store to avoid the delay. Among them, men (40%) were more likely to pick up in store to avoid delay compared to women (37%). 69% said that simply avoiding shipping fees would incentivize them to pick up their online purchase. Women were the more frugal of the group, with 73% opting to save by in-store pickup vs. 65% of men. A physical location can serve as an important touchpoint with consumers for stores that leverage multichannel sales strategies. By segmenting consumer data and preferences, grocers can offer in-store pickup to the customers that will value it most. Not only will this please the customer, this will also… Read more »
Graeme McVie
Guest
Graeme McVie
7 years 3 months ago

One retailer I know was struggling to get the economics of home delivery working, so they decided to remove delivery as an option in one city to see what happened. They expected the online sales to simply migrate back to the stores but they didn’t; in fact, actual store sales declined. Customers were so unhappy to have a valuable service removed that they decided to go and shop with a competitor. Simple lesson learned—you have to keep customers happy to earn their loyalty!

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