Why Stores Still Play a Vital Role as eCommerce Surges
Amidst an unprecedented shift to online shopping stores still play a vital role. During the pandemic as consumers were forced to stay home they turned to online shopping as a way to fulfill their needs. Many tried shopping online for groceries for the first time and if they couldn’t get their groceries delivered they turned to grocery pick up. It is not a coincidence that the retailers that are performing extremely well during the crisis have strong omni-channel capabilities.
The race to become a multichannel retailer has been underway for some time now. In an attempt to fend off the growing threat from Amazon, Walmart, Target and others began the journey of bolstering their eCommerce cabilities several years ago. Walmart’s digital sales increased by 74% in the first quarter of 2020 enabled by the availability of grocery pick up at 3,300 Walmart stores. “Having a wide range of fulfillment options, including delivery to home, collection from store – and by using stores for fulfillment – allowed Walmart to ramp up capacity in a way that many other players struggled to do. We also believe that by using stores effectively, Walmart mitigated some of the higher costs associated with the online channel” said Neil Saunders, Managing Director at GlobalData Retail. That sentiment was echoed when Walmart CFO Brett Briggs said: “it is a big advantage being an omnichannel retailer and I think that is showing right now. We were able to quickly use stores to fill online orders.”
Not to be left behind Target has also invested heavily in eCommerce. During the first quarter of 2020 Target’s digital sales increased by a whopping 141% and it fulfilled close to 80% of those online orders in its stores. Target also had five million new customers during the first quarter and two million of them tried store pick up for the first time.
In the first quarter more orders were picked up from Target stores than in all of 2019. “Target definitely smashed it out of the park…with triple-digit numbers in e-commerce [in the first quarter] and it’s very evident that today more than ever [a] good omnichannel strategy is key for any retailer to survive. It’s not just about selling key essentials but really investing in the omnichannel experience -- something that Target did five years ago” said Michael Lasser, broadline and hardline Retail Analyst at UBS.
And its not just grocery retailers that are benefiting from their omni-channel investments. Back in 2017 Home Depot launched a multi-year strategy called One Home Depot with an $11 billion investment to “further unlock a frictionless interconnected shopping experience allowing our customers to seamlessly blend the digital and physical worlds” said Craig Menear Home Depot’s CEO. This strategy has involved not just improving eCommerce capabilities but a $5 billion investment in Home Depot’s stores. In the first quarter of 2020, Home Depot’s digital sales were up 80% and more than 60% of orders were picked up in a store.
Stores are a win win for consumers and retailers. For consumers it gives them the ability to get what they want, when they want it and where they want it. Sometimes it’s just easier to hop in your car and pick up your groceries at Walmart instead of waiting for them to be delivered or having to do the shopping for yourself. Having the option to pick up your purchases also gives you the opportunity to add on any additional purchases you want when you get to the store.
For retailers having stores can mitigate the costs associated with eCommerce. Although convenient for customers eCommerce is expensive for retailers. They have to pick, pack and ship orders, all of which has a price tag attached to it. Fufilling orders from stores can reduce some of those costs. As Bloomberg reported: “if retailers can continue to convert a meaningful portion of that demand into pickup versus delivery, it will provide an offset to the inherently higher supply-chain operating costs of a digital model.”
If anything the pandemic has taught us how much we all enjoy the mindless activity of going shopping on a Saturday afternoon. These activities create the fabric of our lives and once taken away we have come to realize how much we enjoy and appreciate them. As Target’s CEO Brian Cornell said: “the highlight and takeaway is stores are vitally important and stores will continue to play a really important role to America as we go forward."
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