Outdoor apparel and gear retailer REI is living proof that clicks can drive business at bricks.
The company is respected for its smart approach to multichannel integration, not only from a technical standpoint, but strategically and operationally. Especially dazzling is the company’s in-store pickup program for online orders.
Customers like in-store pickup because they save shipping costs. REI likes it because it brings customers into the store, where they spend even more.
About 35 percent of REI.com’s sales are designated for customer pickup, and that figure climbs above 40 percent during special sales and promotional events, said Joan Broughton, the company’s vice president, multichannel programs. One in three REI.com online shoppers who opt for store pickup, rather than delivery, buy additional goods on that store visit. This tendency adds $70 to $85 to their purchases, she said.
Even though the store pickup option is not new — REI has had it for nearly three years — few multichannel retailers offer it. That may soon change, however, as apparel retailers are starting to show strong interest in the buy online/store pickup option, said Lauren Freedman, president, E-tailing Group, a Chicago e-commerce consulting firm.
REI last month added bicycles to the mix of products sold online and available for pickup in its stores, just in time for the cycling season. (Coincidentally, the $887 million retail cooperative opened its 78th store May 6 in Plano, Tex., the hometown of six-time Tour de France winner Lance Armstrong, where biking is — naturally — a popular sport.)
Though online sales results in the bicycle category are not yet available, Broughton said: “It is not starting slow. It is starting at a peak.” Online bike buyers who pick up their wheels at a store save the $60 flat fee applied to every bike delivery, whether it’s a $249 mountain bike or a $3,299 racer.
In-store pickup also benefits the smaller stores in the REI chain, she said. REI’s Denver flagship spans a massive 95,000 square feet, but its stores as small as 10,000 square feet had been limited in the assortment they could offer, such as large bulky items. That’s since changed with in-store pickup.
“A nice thing about store pickup is that it allows small-format stores to be really competitive and to offer the entire assortment that REI offers,” Broughton said. “In a market like Missoula, Mont., where we have a small store and a very large number of people who enjoy paddling sports, it wasn’t possible for us to display kayaks and canoes.” With in-store pickup, Missoula shoppers can review REI’s selection online and pick up their purchase at the 13,000-square-foot local store.
Merchandise awaiting customer pickup doesn’t linger in the back room, she noted, because online shoppers have already paid and are eager to collect their goods.
HARDER THAN IT LOOKS
In concept, in-store pickup appears to be a logical option to offer, particularly among retailers that know customers value choice. However, there are many pieces to connect and coordinate. One formidable challenge to offering store pickup to online shoppers is lack of integration between the systems supporting various selling channels, such as mail order, phone, Internet and stores. Getting information to flow from one system to the next is no easy task, especially when aging technology is involved. At REI, order management software called Order Power from Computer Solutions feeds information to its warehouse management system, PkMS from Manhattan Associates. REI’s e-commerce platform is Websphere from IBM.
Perhaps more troublesome than the technical aspects of integrated multichannel retailing, said Broughton, is achieving consistency, harmony and balance across all areas of the organization. Employees in different divisions, such as direct sales and retail store sales, can have competing priorities and goals. While a proposed online enhancement, or new service such as store pickup, may benefit one business unit, it could burden another, if business processes are not coordinated and crafted equitably.
For example, store management might resist allocating payroll to the task of handling in-store pickup for online orders if those sales were credited exclusively to the online division. REI recognized this sticky issue in 1998 when it first introduced Internet kiosks to its stores. Today, stores get credit for online purchases picked up in stores, just as they have been credited for sales made via in-store Internet kiosks for the past seven years.
“You need to have [employees] seeing things working the same way for the customer, whether that customer is at direct sales, or online or in the store. They have to be seeing a particular functionality from a customer perspective, instead of from the perspective of somebody within the organization who is in a particular division or department,” Broughton said.
Knowing customers demand consistency in the total shopping experience, REI initially excluded the bike category from the nearly 50,000 sku’s sold online and available for store pickup. There was one simple reason: Some stores lacked bike assembly crews and that meant a store pickup offer made online could not be uniformly honored at every store. Once REI established a centralized “bike build” unit in Sumner, Wash., it could promise bike pickup at every store because bikes now arrive already assembled. With the addition of bikes, now nearly every item for sale online can be picked up in stores, said Mike Foley, an REI spokesman.
“So that was an operational issue for us, more than a technical issue,” Broughton said.
Each potential refinement to the store pickup program is examined from the customer viewpoint and its operational implications, Broughton said. For example, REI is evaluating whether to offer online shoppers the opportunity to view precisely what inventory is available in a given store. Currently, online orders designated for store pickup are delivered from the same central distribution center in Sumner that replenishes store inventory.
“It might be possible and desirable for us to have some [shoppers] pick from store inventory,” she said. “The reason we are not doing it that way now is we have stores that vary in size quite a bit, and vary in assortment quite a bit. So, it’s not possible to offer a uniform experience [for this potential option]. But as time goes on, we may find that it will be helpful from our perspective and from our customers’ perspective to do that. So we are looking at that but we are not planning to do anything yet.”
The opportunity to view store inventory is clearly something online shoppers like. However, most Web sites don’t provide much incentive for local shopping and that may be a key opportunity for retailers, according to a report by the Dieringer Research Group. In its survey of consumers identified as “Web2Store” shoppers — those who gather information online before buying in stores — 73 percent of respondents said the ability to see whether a store has a product in stock is a feature they view as important. Consumer electronics chains Best Buy and Circuit City enable online shoppers to check merchandise availability for specific stores, but that option is limited to three locations designated by the shopper.
“Saving time is the number-one reason why people do research online before shopping locally, and the ability to identify whether a store actually has a product in stock is huge,” said Thomas Miller, senior consultant, The Dieringer Group. “It’s sure to attract smart shoppers, who tend to spend more once they get in the store. Moreover, it has supply-side benefits because now your consumer demand is integrated further up the inventory management chain, which allows the store to manage inventories better.
“At this stage of the burgeoning Web-to-store shopping trend, the ability to provide inventory information online should be a powerful competitive differentiator because a lot of retailers are not in a position, system-wise, to offer that,” he added.
REI’s service-oriented, elegant approach to in-store pickup does not surprise those who follow the company’s initiatives.
“They are very detail-oriented,” said E-tailing Group’s Freedman. “They take their brands seriously and it pervades all their messages. Even down to their e-mail communications about in-store pickup — they are very in sync with their brand and they are very thoughtful about how they approach their customer.”