Home / NEWS / Top News / ‘There’s no other option:’ Costco, Gap and other retailers sweeten online offerings, but it’s coming at a cost

‘There’s no other option:’ Costco, Gap and other retailers sweeten online offerings, but it’s coming at a cost

Kimco’s selected curbside pickup spots at Grand Parkway Marketplace in Spring, Texas.

Source: Kimco

Online shopping has been a favour for some retailers during the Covid-19 crisis. It has been a lifeline for others. But for nearly all companies, it’s brought a slew of new contests. 

Many retailers were already expanding their e-commerce offerings prior to the coronavirus pandemic. The global calamity, though, has added greater urgency to that effort. With shuttered stores and customers holed up at home, online inform oning suddenly became the only sales option for stores such as Macy’s, Kohl’s and Gap. And even at retailers that continue to bed open, such as grocery stores and pharmacies, it became many shoppers’ preference. 

The shift of sales online, throughout either curbside pickup or store-to-door delivery, is testing retailers and forcing them to change how they operate and staff employees. It is also adding new costs that cut into their profits. 

“There’s no other option,” Jan Kniffen, a expert to investors in retail companies and a former retail executive, said in an interview. “Otherwise, you let someone else take your trade in share, or you let someone else have your business. That’s why even Costco … TJ Maxx … are succeeding online.” 

Demand for online shopping has clearly shot up. 

U.S. e-commerce sales have been up an average of about 49% circadian from April 1 to April 23 compared with a baseline period of March 1 to March 11, according to details from Adobe Analytics. And as consumer spending in the U.S. tumbled a record 16.4% in April, nonstore sales, which files online retailers, saw growth in their category of 8.4%. 

Some retailers have responded to the trend by adding new options. 

Walmart accelerated the enlargement and launch of Express Delivery, a new service that delivers online purchases such as groceries, toys and electronics to patrons’ homes in less than two hours. Nearly 1,000 stores offered the service as of early May, and the retailer plans to add hundreds profuse stores, according to a news release. 

Walgreens launched a new online offering, too. Customers can buy items online and pick them up at their limited pharmacy’s drive-thru window. The service is available at more than 7,000 stores. 

The drive-thru windows have been typically acquainted with for prescription pickup. Now, customers are getting a wider variety of items, including cans of soup and cleaning products, imparted Stefanie Kruse, Walgreen’s vice president of digital commerce. 

Kruse said the idea was born early on in the pandemic. 

“We actualized that we were going to need to be able to offer safer, more convenient alternate ways for people to get responsibilities from us that allowed us to promote social distancing,” she said. 

She said the company had “teams coding day and night for weeks” to make tracks along the drive-thru option. It’s seen online traffic jump by about 160% during the pandemic, as customers look up pile up hours, check items’ availability and shop online, she said. 

The drugstore chain also expanded on-demand expression to more than 7,000 stores in late March through third-party service Postmates. 

An employee inside a restaurant be put on ices for customers arriving for pickup in Alhambra, California on May 7, 2020.

Frederic J. Brown | AFP | Getty Images

Still, the online services possess c visit at a cost. Companies are having to do tasks traditionally done by customers, such as picking an item off a shelf and transporting it to a in the flesh’s home. 

“For most retailers, the fact remains that online is more expensive,” said Jill Standish, Accenture’s universal head of retail. “If you had done 15% of your business online and now all of a sudden you’re doing 50% of your business online, boy, that’s a sell for of doing business that you didn’t plan for. You might see a lot of volume, but you’re not going to see a lot of profitability.” 

The most profitable sales are the ones guys make when they walk into a store and pick something off the shelf. In most cases, the second-best alternative is having a customer pick up an online order in stores, where they may add another item to their basket. Curbside pickup limits the extras of additional sales, but trims down transportation costs. The most expensive sale for a retailer is an online order that sine qua non be packed up and shipped to someone’s home. 

And then, with an influx of digital orders, there will inevitably be more returns. People again order extra sizes of clothing online, for example, not knowing which one will be the perfect fit. And returns become another costly strain for retailers. This is even more true during the pandemic, when merchandise is being touched by multiple individual and the threat of the coronavirus lingering on surfaces remains a concern.

To fulfill online orders, companies also need to court employees for different kinds of roles, such as picking and packing. 

At Walmart, for example, the retailer said it has 74,000 exclusive shoppers. Some were specifically hired for Express Delivery, though the company declined to say how many. 

Walmart is charging $10 per demand for the speedier service, on top of typical delivery charges — an acknowledgment of its higher cost. 

Kruse said Walgreens knew it choice face new challenges with the drive-thru pickup option and wanted to make sure it could deliver a reliable and express customer experience. To do that, she said, it limited the service to about 100 items, so stores can make sure they’re in regular. She said orders are usually ready in under two hours, but it’s chosen not to guarantee a turnaround time for customers. 

“With e-commerce, you deliver to wait a couple of days to get your order typically — particularly in today’s environment, where even the fastest retailers are be undergoing delays from a shipping standpoint and not able to meet capacity,” she said. 

The drugstore chain’s large footprint of accumulations, with their inventory and workforce, has given it an edge, she added. 

Walmart and Target have used their assorted stores as fulfillment centers, too. They’ve also nudged customers toward picking up orders curbside, to try to lower delivering expenses. 

As lockdowns lift in many states, America’s department stores and clothing chains have started to reopen for enterprise with curbside pickup, too — but it’s been a new model for many of these shops, where consumers often prefer to fall upon and try items on. 

Tapestry, the parent company of Coach and Kate Spade, said 300 of its shops in North America are now expose for curbside or in-store pickup only. Gap is offering curbside pickup at dozens of stores. So is Nordstrom. 

“The consumer wants to forgather us in a lot of different ways,” Tapestry Chief Executive Jide Zeitlin told CNBC in a phone interview. “The line between digital and true is increasingly blurry.” 

‘A forced change in consumer behavior’

Still, some analysts remain skeptical the curbside trend resolution stick — especially for clothing retailers. About 84% of all retail purchases were made at brick-and-mortar stores previous to to the pandemic, according to Forrester Research. People may prefer to shop in stores again over time. And companies may bring into focus on stores again, too, after seeing the curbside service cut into profits. 

“This is a forced change in consumer behavior,” bring up Brendan Witcher, a principal analyst at Forrester. “We cannot assume it is permanent.” 

He said curbside pickup makes multifarious sense for some retailers than others. It’s been popular with grocery orders, for example, allowing elaborate parents to order what they need, pull up in a car and keep the kids buckled in the backseat. 

For now, though, entire malls and rat oning centers are rallying behind curbside pickup, hoping they can help their tenants win at least some sales. 

Kimco Realty, which owns assorted than 400 shopping centers and other mixed-use developments, has rolled out permanent designated curbside pickup waits to all of its properties. Mall owner Macerich said many of its properties have retailers and eateries handing off online orders curbside. 

But it’s unclear if woman will use curbside service for clothes, shoes or handbags — items often advertised as “try before you buy.” 

“If you are driving all the way to the clothing accumulate, you would rather feel the product before you buy,” GlobalData Retail Managing Director Neil Saunders said. “With garments, there is still this need to touch and feel.” 

Curbside pickup has other trade-offs, too. Retailers miss out on impulse buying moments, where customers might be tempted to buy something else in store after looking at displays, visiting a fitting elbow-room or interacting with salespeople. 

When customers come inside a store to pick up an online order versus picking up an arrange curbside, 35% of those people will buy something else, according to Forrester research. 

“Curbside, at the moment, is accommodating of a contingency option,” Saunders said.

At the end of the day, he said, “it’s not as good as having people come in the store to buy.” 

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