How “buy online, pick up in store” gives retailers an edge
The pandemic has quickly accelerated the digital transformation of retail – but as lockdowns end and the economy recovers, many businesses are wondering what the future holds. Customers are unlikely to revert to their old ways of shopping, and yet adapting to online options has posed serious challenges for retailers, many of whom viewed these services as mere interim measures, not solutions to long term. What can retailers do to stay relevant in the post-pandemic world while retaining the benefits of proven strategies? In this article, the authors discuss upcoming research which suggests that the ‘Buy online, pick up in store’ model may be the best option, as it offers many of the benefits of shopping online without the many drawbacks of other types of services. digital. shopping experiences. They go on to suggest that many companies could likely benefit from performing analyzes on their own data, similar to the analysis described in the authors’ research, to identify the best strategies for their unique business contexts and needs.
Despite all the talk about digital transformation in recent years, before the pandemic, many retailers continued to rely heavily on physical stores. In 2019, less than a third of American retailers had implemented a digital transformation strategy, and only 4% of the top 500 retailers offered online ordering with curbside pickup.
When the Covid-19 pandemic struck, the US retail landscape changed overnight. Big brands have closed store windows and dived head-first into a variety of omnichannel experiences, including services like curbside pickup; same day home delivery; and buy online, pick up in store (BOPIS). At the end of last summer, the share of retailers offering curbside pickup climbed to 44%. Brands that had long avoided prioritizing e-commerce, such as Costco and TJ Maxx, scrambled to create online stores. Walmart launched home delivery in two hours in April 2020 and Walgreens pharmacies implemented a BOPIS option in May.
Now that lockdowns are ending and the economy is thawing, many retailers are wondering if these changes will persist after the pandemic. Over the past year, 40% of Americans tried a new method of shopping, and nearly three-quarters of people who have tried curbside pickup, BOPIS, or delivery want to continue using these services after the pandemic is over – posing a challenge for businesses that had viewed the shift to omnichannel retail as a stopgap measure to be used only until customers could return to the store. Many retailers rely on in-store traffic to drive sales, because attracting a customer to the store both lowers their chances of going with a competitor and increases their chances of making instant purchases.
Additionally, many companies have found that services such as curbside pickup and same day delivery are expensive to operate. High shipping costs can reduce profitability, and online shoppers are much more likely than in-person shoppers to abandon their cart and see lower levels of sales. brand loyalty. So what can retailers do to meet their customers’ growing expectations for flexible, digital shopping experiences while maintaining the profit margins they need to survive?
Answering this question begins by recognizing that not all omnichannel strategies are created equally. Our upcoming research, soon to be published in Management sciencesuggests that BOPIS in particular can help retailers increase in-store sales while delivering the experience that customers today (and tomorrow) want. This is because unlike other digital channels, BOPIS both offers the benefits of digital shopping and encourages customers to continue engaging with physical stores.
To better understand the impact of a BOPIS omnichannel strategy, we analyzed 49 million online and in-store transactions of a national retail chain before and after a competitor launched a BOPIS service (this research was conducted before the pandemic). We found that the company’s sales fell 4.7% online and 1.8% in-store, and the drop in in-store sales was greater the closer the store was to the store. ‘one of the competitor’s BOPIS locations. This suggests that by launching BOPIS, the competitor was stealing not only the company’s online sales but also their in-store traffic.
In addition, we also found that in-store sales of more profitable and more expensive items suffered a larger decline than sales of cheaper products, suggesting that the competitor’s BOPIS program was particularly effective in attracting traffic. high quality pedestrian area from customers. buy more expensive items. This makes sense, because while customers are generally more uncertain about purchasing more expensive items online, BOPIS alleviates some of that uncertainty by allowing free and effortless returns if the customer is not satisfied. of the product at the time of pickup.
These results are consistent with our previous research, in which we found that after the introduction of BOPIS, retailers would experience a drop in online sales and an increase in in-store sales that added to a net increase in overall sales. But why is this? A number of important factors are at play.
One of the main benefits of BOPIS is that it allows customers to search for products online and then purchase them in-store at their convenience, with no delivery charges or rigid pickup times – in fact, a 2019 survey revealed that 48% of people who used BOPIS did so due to the lack of shipping costs. BOPIS also gives customers visibility to which stores have a product in stock, helping them to avoid unnecessary travel and thereby improve their overall shopping experience.
Moreover, BOPIS is not only good for customers. Eighty-five percent of consumers who have used BOPIS report making additional, unplanned in-store purchases when picking up an order placed online, which is one of the main reasons why traditional in-store shopping is beneficial for retailers. In addition, because BOPIS is more profitable than other omnichannel services, it gives retailers the option of offering a small discount or other incentives to encourage customers to opt for the BOPIS option, thus creating a win-win situation for the customer and the business .
Ultimately, foot traffic is and will continue to be the lifeblood of retail, and BOPIS can bridge the gap between the convenience of e-commerce and the profitability of in-store shopping. Given its many benefits, retailers should consider focusing their marketing efforts on promoting their BOPIS services, and they should highlight features that consumers value, such as zero delivery charges and warranty. that the products will arrive in their hands safe and sound. Additionally, since BOPIS allows customers to review products before they leave the store, retailers should prioritize making the returns process as smooth as possible. One of the biggest drawbacks to door-to-door delivery is its notoriously difficult returns process, so offering fast, pain-free returns and exchanges is one of the best ways to differentiate BOPIS from delivery (and so do return customers in person).
Digital purchases have been gaining traction for years. Today, after a year of massive investments in omnichannel infrastructure, we have reached a tipping point. Customers are used to online and omnichannel shopping experiences, and they won’t look back. The good news is that leveraging digital solutions doesn’t necessarily mean forgoing the benefits (for both the customer and the retailer) of in-store shopping. Rather than trying to fight the tide of digital transformation, our research suggests that the BOPIS approach may be the key to helping retailers engage their customers – both online and in-store.