Competing with Free Shipping the Smart Way

Ecommerce, ecommerce fulfillment, retail, inventory management, omnichannel, omnichannel fulfillment, omnichannel operations, ship to store, ship from store, in-store pickup, customer experience, shipping, free shipping, AmazonOnce viewed as an extra customer incentive, “free” shipping has quickly becoming the norm for retailers when selling online. With online retail giants like Amazon upping the ante, it seems like there is no other option for retailers but to keep up and take the hit to the bottom line.

Omnichannel retailers are starting to realize they don’t always have resort to margin-eroding “free” shipping to compete. By offering customers the option for in-store pickup of online orders, they can meet customer’s increasing expectations for immediate gratification and increase their total revenue and margins. The key is to bridge the gap between customers’ online and in-store shopping experiences by optimizing existing inventory and minimizing revenue lost to free shipping.

Retailers who offer in-store pickup stand to benefit in four ways:

Increase online conversion rates: Eighty-one percent of consumers conduct research online before they make a major purchase, but 95% of purchases still take place in stores. For many product categories, no amount of online research can replace exploring the options in person – ideally with the help of an attentive store employee. The in-store pickup option engages customers online, an instant gratification that can significantly increase online conversion rates.

Eliminate shipping charges: The cost of “free” shipping shows up in reduced gross margin and depends greatly on the product’s size and weight, final destination and shipping method. Consumers are also starting to expect free shipping on returns as well, adding more costs. The combination gives the customer enough confidence to purchase items that they aren’t 100% positive will meet their needs – and sometimes order two different items with the intention of keeping only one. This results in a greater percentage of returns and their associated costs. Pulling customers into the store lowers this cost as retailers can utilize existing inventory and calm the anxiety of an unsure shopper.

Ramp up in-store traffic: Retailers already spend millions of dollars to create an enjoyable in-store experience, and yet continue to push customers online. Bringing them back into the store allows you to take advantage of your investment and upsell them. If your sales team provides a quality in-store experience, shoppers may be inspired to spend more, adding up to 40% incremental spend to the online portion of the transaction.

Customize the experience: Once a shopper has placed an order online for in-store pick up, you have the benefit of a head start. Before the customer even walks in, your sales team can be aware of their tastes and prepare for their arrival. Targeted offers and additional products based on their purchase can be made available to make the customer feel like their needs are understood. When the customer feels important and sees that their store of choice values their time, it sets the foundation for a loyal relationship.

In-store pickup best practices

In-store pickup benefits retailers and buyers alike, but there will be hurdles to clear as you create a seamless process. First, you must have the systems and processes in place to make it an option. Up-to-date inventory systems date that are flexible across channels allow you to offer in-store pickup while eliminating the barrier of siloed inventory practices.

Once a system is established, retailers should actively promote in-store pickup. This sounds simple enough, but it can be difficult to convince consumers to try something new that they don’t understand. With education, they will soon trust that the system will know their order and your store will have it in stock when expected.

Finally, tailor the in-store experience to meet customers’ expectations of the new model. Make sure your sales teams can communicate effectively and understands how the new process will work. They are the first people customers will seek out for information and should be prepared to eliminate any lingering shopper anxiety. For greater convenience, consider a special pickup area where they can see additional products relevant to their tastes.

Convenience and confidence are key, and retailers that provide the most seamless, optimized shopping experience will reap the rewards of loyal shoppers and bigger purchases. Offering in-store pickup helps you utilize existing inventory and decrease costs in a way that aligns with today’s demanding customer.

Gregg Aamoth is the co-founder of cloud-based retail redemption solution POPcodes

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