IE 11 is not supported. For an optimal experience visit our site on another browser.

In-Store Pickup Could Be Retail's Secret Weapon Against Amazon

In-store pickup will come under pressure this holiday as more Americans do their shopping online and opt to pick up their orders in store.
A zoomed illustration image of a man looking at a computer monitor showing the logo of Amazon is seen in Vienna
REUTERS/Leonhard Foeger
/ Source:

It's time for traditional retailers to prove that one of their biggest advantages over Amazon can, in fact, deliver.

After last year stumbling through the first real test for in-store pickup, the retail service will come under even more pressure this holiday, as more Americans do their shopping online and opt to pick up their orders in store.

Whether to save on delivery fees or get their items more quickly, some 39 percent of consumers plan to use retailers' in-store pickup services this season, according to the International Council of Shopping Centers. That's up from 32 percent last year.

With this uptick comes added pressure for brick-and-mortar retailers, who are trying to grab their share of an expected 11 percent increase in online holiday revenue. That's because the service disappointed roughly half the people who tried it last year, as subpar technology and untrained employees led to failed, canceled or incorrect orders.

While industry experts agree that the learning curve will be less steep this holiday, they remain cautious about how well retailers will be able to handle the stress on their systems — particularly during peak days right before Christmas.

"A lot of them will continue to botch it," said Rod Sides, who leads Deloitte's Retail & Distribution practice.

Retailers have already made strides in working out the kinks for their buy online, pick up in store services. Whereas roughly 50 percent of shoppers who tried the service last year reported an issue, that number fell to 40 percent this year, according to a set of surveys by JDA Software.

Related: Online Sales Hit New Highs on Black Friday

Still, that rate of mistakes far exceeds those associated with at-home deliveries, with just 25 percent of shoppers reporting issues when using that option, JDA found. The most frequently cited problem with in-store pickup is store associates who take a long time to locate or cannot find an order, JDA said. But even more troublesome is when the order fails entirely.

According to separate data by StellaService, a firm that measures customer service among a group of major retailers, nearly 20 percent of the orders its representatives placed for in-store pickup last holiday were unsuccessful. That includes roughly 6 percent of orders that were canceled, and 6 percent that were not able to be placed.

Those metrics have improved heading into this holiday season, with a success rate of 92 percent, according to StellaService. The rate of fulfillment has also improved. After trickling to an average wait time seven hours on Christmas Eve last year, it has since sped up to right around two hours, said Carol Krakowski, insights and analytics manager at StellaService.

"This year hopefully we don't see that same slowdown," she said.

Related: Save on Cyber Monday with These Tips

Retailers see a big spike in orders placed for in-store pickup starting at the end of November. Last year, volumes for these types of purchases shot 115 percent higher from the end of the month until Christmas Eve, according to Radial.

To avoid hiccups during high-demand periods, retailers have invested in technology that helps them stock the proper amount of inventory in stores and in warehouses, and gives them more accurate information regarding its location. That way, they can fill orders more efficiently.

They've also added dedicated staff to fulfilling orders placed for in-store pickup, with Wal-Mart dedicating a manager in every store to the service. The world's largest retailer has also repainted these areas a bright orange, so they're easier to locate.

"You're seeing more retailers doing it better," said Jim Prewitt, a vice president of retail strategy at JDA Software. "They've made adjustments."

Sales Boost

When done right, in-store pickup can provide a substantial boost to retailers' sales. Not only does it allow them to grab a larger chunk of online sales later in the season, but it also gives them the opportunity to persuade shoppers to add extra items to their carts once they walk into the store.

Target recently said that one-third of the people who place online orders for in-store pickup buy additional merchandise when they arrive.

"You've got to be able to create a compelling reason to pick up something else while you're in the store," Sides said.