Saturday, October 06, 2007

Who Knew That The Real Value Of Buy Online - Pick Up In Store Was Saving The Earth!

OK The following story that shares some stats from a recent Wal-Mart press release is bizarre. I never in a million years would have used the "green" angle to justify and show value of this program. To me the two biggest values that buy online and ship/pick up at a local store are:
  1. Lowers the retailer's overhead for checkout related expenses. Basically you move the cash register to the person's individual home and as a result you dont need an army of cashers, all the equipment that goes along and all of the precious store floor space that check out stands take up
  2. Allows the consumer to benefit from a much greater depth of selection (which is a big issue for Wal-Mart since they actually offer less selection than most other stores there same size)
Wal-Mart Says Its Site-to-Store Program Doing Well
By Evan Schuman, Ziff Davis Internet
July 11, 2007

Wal-Mart's version of the virtually ubiquitous buy-online-pickup-in-store strategy has reduced customer shipping costs by $5 million while sharply increasing new customer acquisitions and in-store upsells, according to figures released July 10 from the world's largest retailer.

In announcing that it is extending its Site-to-Store program to more than 3,300 stores in the U.S., Wal-Mart released a handful of carefully selected stats to show that its approach to the strategy is working.

Wal-Mart's approach is slightly different than the traditional approach, which uses the Web to help move in-store merchandise. The twist to Site-to-Store—which was launched in March—is that promotes "tens of thousands of products" that are not available in stores and then offers to ship them free to a local Wal-Mart.

Since the launch, about one-third of all sales have beeen placed through Site-to-Store, Wal-Mart said, specifying that "more than half-a-million total units have been shipped through Site-to-Store, saving customers more than $5 million in shipping fees."

On the new customer acquisition front, Wal-Mart's statement said that "more than 50 percent of Site-to-Store orders [came] from new customers who make their first purchase at using the service." The chain also reported a 20 percent increase in the number of Site-to-Store "customers who spend an additional $60 on purchases in the store when picking up their orders."

In the environmentally green arena, the $345 billion chain reported a weekly gasoline savings of 1,000 gallons and a monthly box reduction of 20,000 "as a result of transportation and packaging efficiencies."

That last claim caught the attention of veteran retail observer Jeff Roster, a Gartner research vice president specializing in retail.

"People save on shipping costs only to put some of it back into costs to drive to the store to pick up the merchandise. For me, it’s about convenience. I want to make sure the kayak is there along with the size 14 shoes I saw," Roster said. "Given the mileage I get on my crew cab truck, I didn’t save much. But the idea that green initiatives are gaining traction is fascinating. This could have a major impact on store design, logistics and definitely IT. This will also force IT service providers to embrace green IT as a manufacturing as well as a marketing strategy."

As for the other figures Wal-Mart released, Roster applauded the progress, especially the claim about customers spending more on-site. "If people are going to drive to the store, they are going to make incremental purchases," Roster said. "It is just another indication at how nimble Wal-Mart is."

Greg Buzek, the president of the IHL Consulting Group, said that while he "loves the idea" of using this tactic to get customers into the stores—and also to help Wal-Mart compete with those who want to compete on pure price—he wasn't clear from the released figures whether the additional $60 referenced was actually new money or not.

"The question is whether those people would have been at the Wal-Mart anyway. If they were planning to be there anyway and spend the $60, then this is no big deal," Buzek said. "If they can quantify that this was an additional trip and that they spent $60, then that is huge. I can’t tell" based on the figures Wal-Mart released.

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