In-Store Pickup Pitfalls and Payoffs

Multichannel marketers that allow catalog and online customers to pick up their orders in one of their stores find the service hugely popular among shoppers. For instance, nearly 45% of sales this year have been picked up in stores, up from 39% last year. The option enables shoppers to avoid paying shipping and handling fees, a sore point for many potential catalog and online buyers.

Many marketers also find that allowing for in-store pickup tends to increase order sizes. At Kent, WA-based Recreational Equipment Inc. (REI), up to 40% of catalog/Internet customers who pick up their goods in one of the company’s 70-plus stores make additional purchases once they’re in the store, says Joan Broughton, vice president of multichannel programs for the outdoor apparel and gear manufacturer/ marketer. By the time they leave the store, these customers spend an additional $80-$90 on average.

Yet according to a recent survey by Cleveland-based retail services firm LakeWest Group, only 19% of multichannel merchants offer in-store pickup. No doubt that’s because setting up the operations for the service is somewhat trickier than one might think.

All systems go

Perhaps the most daunting hurdle is the need to integrate the back-end systems of your multiple channels. If you seek to link your catalog and Internet fulfillment to your store stockkeeping and receiving, your systems need to be linked, says Mike Grandinetti, senior vice president/ chief marketing officer for Tewksbury, MA-based Yantra, a provider of fulfillment management software.

Once you link the back-end systems of your direct and retail operations so that they communicate with each other, the appropriate store can be notified by e-mail or fax immediately after a customer places an online or call center order that he wants to pick up himself. “This way, if the item is already in stock in the store,” Grandinetti explains, “the order can be ready pretty quickly for the customer.” On the other hand, if the product isn’t in stock, the customer can be notified right away as to when the item will be shipped to the store.

Taking its existing e-commerce platform, REI developed a proprietary software program to communicate with its order management software (Order Power by Computer Solutions) and its warehouse management software (PKMS by Manhattan Associates). Although she won’t specify how much REI spent to develop its “bridge” software, Broughton says that it “has not been cripplingly expensive. It was far less expensive than if we were to install, say, a new e-commerce platform.”

When customers place direct orders and request in-store pickup, their orders are transmitted to REI’s fulfillment center, which warehouses the company’s direct and retail inventories. The orders are picked, packed, and shipped via a trucking service in specially marked boxes along with inventory earmarked for that particular REI branch.

Sending the order with other inventory means the additional shipping costs accrued are minimal at best. “The other items are going to the store anyway, so it’s more an issue of whatever extra time has to be taken to pick the orders from the truckload,” Broughton says.

In addition to developing the bridge software, REI created an automated e-mail program that sends three messages to direct customers who opt for in-store pickup. The initial message acknowledges the order and informs the customer that the item will be sent to a store within a given period of time. The second e-mail alerts the customer once the order has left the distribution center. The final message informs the customer when the order has arrived at the store and is ready to be picked up.

Space race

The need to link back-end systems isn’t the only reason more cataloger/retailers don’t offer in-store pickup. Many specialty marketers simply don’t have enough room in their stores to house a significant number of items to be picked up. For instance, Morlee Griswold, director of direct marketing for Ventura, CA-based Patagonia, says the lack of space in the stores’ receiving areas is why the outdoor apparel marketer doesn’t yet offer the service.

What’s more, offering customers in-store pickup “can be a nexus-creating event,” says Dave Roehr, executive vice president of outdoor sporting goods cataloger/retailer Cabela’s and president of Cabela’s World’s Foremost Bank division.

Sidney, NE-based Cabela’s currently has stores in eight states and plans to expand into two more states next year. Because it has nexus, or a physical presence, in those eight states, Cabela’s has to collect and pay sales tax on sales from customers who live there. But if a customer who lives in Iowa, where Cabela’s doesn’t have a store, picks up an order in a Cabela’s Nebraska store, Cabela’s would have to collect sales sales tax from him, Roehr says. If the customer had the order delivered to him, however, Cabela’s wouldn’t have to collect the Nebraska sales tax.