Grocery stores have found a way to take grocery shopping online without the expense and customer hassle of home delivery. This hybrid shopping experience, called click and collect, allows customers to choose their groceries online and pick up their orders at a convenient store location and time window. For retailers, the online model builds customer loyalty and profitability through frequency of shop and increased multi-channel sales.
Benefits of The Click & Collect Model
1. It’s customer focused
Customers order online and pick-up their pre-paid order at a local store. There is no cost for the service and it skips the inconvenience of waiting for a delivery during a specified window or standing in line at checkout. Product selections are also broader than what customers might find in their local store. Customers are now able to access the retailer’s complete listing base rather than just the items that fit into the square footage of their local store.
2. It’s relatively inexpensive for the retailer to implement
Groceries are picked and packed at one central location. There is no need to invest in an expensive distribution network or to find ways to balance loads while meeting a specific delivery window. Compared to home delivery, click and collect lowers costs related to labour and distribution. Now, the biggest challenges for click and collect retailers are figuring out the optimal drive through location, managing the traffic flow, and setting up appropriate in-store storage space for the completed orders.
3. It works for urban store formats
Smaller retailers can offer a full assortment of products through collect and click grocery sales, which allows them to meet the eclectic needs of international consumers. As well, parking is no longer an issue as customers simply drive through rather than requiring a space for their car. For customers that do not own cars, pick-up options exist in some urban neighbourhoods that accommodate cabs or carrying.
4. It builds loyalty
Online customers can save their grocery preferences to make future orders more efficient. This digital trail allows the retailer to offer additional value such as recipes and recommendations. Support of the online benefits with fast customer service and smooth pick-up processes adds to the customer experience and builds loyalty.
Click & Collect Across Different Countries
Grocer giant Tesco is leading the adoption of online retailing. Since launching their click and collect service for over 800 brick and mortar stores, the grocer giant has implemented dark stores to supply groceries to nearby locations and satisfy customer demand. This avoids inefficiencies and costs associated with in-store picking, which often depend on inventory availability and customers’ willingness to pay a premium for the service. Third-party suppliers of Tesco’s online Marketplace also have an option to use the click and collect model to boost sales on the basis of better service and increased loyalty.
International grocery retailer Ahold is growing e-commerce sales through Peapod, its online delivery service. Instead of preparing orders for customers to pick up in-store, Ahold directs them to Peapod Pick-Up warerooms that can house up to 10,000 items depending on demand. Customers browse through product information, prices, and specials online, then head to a Peapod location at a predetermined one-hour window. Ahold’s wareroom-based click and collect service, also called click and drive, is well-received in the US and Europe, and hopes to increase Peapod locations and achieve 40% sales penetration of private brands in 2016.
Canada: An Alternative To Click & Collect
Owned and operated by Longo’s, Grocery Gateway delivers groceries to homes and offices in the Greater Toronto Area using a centralized fulfillment facility that fulfills orders while minimizing out-of-stocks. According to co-founder Stephen Tallevi, an important advantage that Grocery Gateway has over the click and collect model is their customers’ expectation and requirement of home delivery. Customers, who range from young urban professionals to aging or injured individuals, don’t drive or find the trip to and from the store inconvenient, and turn to Grocery Gateway to eliminate the stress of grocery shopping.
But the two delivery models share common challenges: similar to click and collect, Grocery Gateway must maintain optimal fill-rates and ensure that logistics work properly. An additional challenge for Grocery Gateway is building enough route density.
“Four houses in the same street can have the same delivery on the same day but each [customer] selects a different delivery window to suit their needs,” Tallevi explains.
Since customers dictate the delivery window, Grocery Gateway must accommodate these orders even if the same route is to be repeated several times a day. On the possibility of offering a pick-up option at Longo’s locations, Tallevi is open if there is enough demand.
The Future of Click & Collect
Industry experts predict that the online segment will make up 20% or more of all grocery sales in the long run, which places more importance on how services like click and collect can help retailers remain competitive. Beyond groceries, retailers like Amazon are also expanding their pick-up delivery operations. Amazon’s delivery lockers, which are installed in drug, grocery or convenience stores, allow customers to securely pick up their packages from a predetermined location 24 hours a day. UK department chain John Lewis implemented a click and collect service in 270 locations, which contributed to a 41% increase in online sales. Ultimately, it comes down to demand: there needs to be enough players in the pick-up delivery market to increase customer awareness about these online options to make implementation feasible and profitable.
Click and collect groceries are an interesting technological development that draws on both current and past distribution methods to create a more seamless customer experience and increase profitability for the retailer. Based on the success of our US and European counterparts, we think that click and collect groceries would be a great addition to the grocery retail offers in Canada!