Since the early days of e-commerce, the key to success – or reason for failure – has been delivery. How can merchants deliver at a low cost to themselves while providing a convenient solution for consumers? The latest iteration might be found in brick-and-mortar establishments, famously rumored to be in the process of being “edged out” by online retailers.
Initially, most e-commerce merchants only provided one delivery solution: home delivery for a fee. Now there are a number of options available in the marketplace:
- Increasing rates based on the dollar amount of the order (Victoria’s Secret)
- Differentiated pricing for varying levels of service – g., free shipping or a flat rate for slower delivery, vs. a fee for express guaranteed delivery (Hot Topic)
- Flat fees for entire orders, which encourages consumers to bundle as much into their order as possible (Overstock, Woot)
- Free shipping on every item (Wayfair, Zappos)
- Free expedited shipping with a membership (Amazon Prime)
As convenient as it might be to receive items at home, there are some issues for consumers and online merchants. For example – we ordered a gaming computer from Best Buy, but didn’t have a guaranteed window within which it would be delivered. It seemed like not the best idea to just have a big box worth hundreds of dollars sit on our doorstep, and waiting around at home wasn’t really an option. From the merchants’ perspective, being unable to consolidate shipping can have cost implications, not to mention customer service headaches if merchandise is dropped off without a signature and goes missing.
To find a way around this, some retailers have employed a “click and collect” — also known as “ship to store”— option for online purchases. There are several ways to go about this:
- Consumers can request to pick up their online shopping from the most convenient physical store at an agreed time, such as next day. Some merchants even enable consumers to pick up their orders within one hour; this has the added benefit to the merchant of being able to pull from in-store inventory.
- Many merchants offer ship to store as an incentive, offering free shipping to a retail location specified by the consumer at the time of purchase. This allows consumers to get potentially online-only items at a location convenient to them.
- Online-only retailers – e-commerce giant Amazon is the latest – have built physical locations designed for package pickup. These are especially popular in college towns and dense urban areas, where leaving packages at a consumer address is often prohibitive for practical and security reasons.
- Third-party locations used for pickup, where the financial transaction is handled online and the merchandise is delivered to another location like USPS or the UPS Store. (We got our computer this way.) There are also non-shipping providers that follow this model: CollectPlus, Doddle, and Yodel serve as locations where packages can be picked up.
- Consumers order merchandise online, but all monetary transactions are handled in-store at time of collection.
Anjee Solanki has already talked about why brick-and-mortar stores aren’t down for the count; with the ability to provide a whole new experience to customers that combines benefits of both e-commerce and a physical location, there may be an important reason to keep an eye on retail real estate.
While both the US and the UK have been taking advantage of click and collect, the latter has been seeing some serious success in embracing the model. For example, many banks in Canary Wharf have banned non work-related deliveries. Sensing an opportunity, Doddle opened a new Canary Wharf location and now handles an average of 11,000 parcels per month in that postal code alone; these results demonstrate how buying online and picking up elsewhere can meet a clear consumer need.
On this side of the pond, major online-only retailers are taking to the streets in numbers, citing branding, omni-channel customer experience, and increased basket values as reasons why they are getting into “real” real estate. Recent additions to the US shopping landscape are Bonobos, Warby Parker, Athleta, Rent the Runway, JustFab, Birchbox, and BaubleBar, to name a few – and some of these retailers are reporting that on average, the in-store spend is 2-3 times the amount purchased online.
Click and collect benefits the consumer in many ways – but it’s great for merchants, too. Based on anecdotal evidence, it’s likely that the overall operational cost of offering it as an option is lower than free home delivery. Instances of fraud are also typically much lower as compared to home delivery, especially if payment is handled in-store with the credit card present – when transactions are finalized in-store at time of pickup, the merchant benefits both from a shift in EMV liability and lower point of sale fees than those charged for e-commerce.
Retail is evolving almost as quickly as technology can support it – and while there is no way to know what it might look like in even a few years, we can be relatively confident retail real estate will be part of a holistic approach by the most successful retailers.
Alex is a retail specialist working out of the Colliers office in Cincinnati, Ohio. She is a polymath, retired rollergirl and lover of interior design.