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Retail Insights: Is Delivery the New Drive-through?

For the longest time, major pharmacy chains had it made.
Prescriptions grew YOY, which kept store visits and purchase frequency high. Customers walked through the store to pick up their prescriptions and always found more things to buy so pharmacy chains expanded cosmetics, added groceries and expanded seasonal. Sales grew YOY, and these chains expanded to every corner of main street America.
Then one day in the early ‘90s, one of the big chains started putting in drive-through pick up windows at their pharmacies. What an innovation! What a service to customers! Stores with a drive-through curried favor with customers and a competitive advantage against other chains and independents. Customers by and large loved the change, even as throughput at times could be staggeringly slow. It truly was a great service and convenience for customers.
It didn’t take long for the rest of the market to take notice, and soon stores were being remodeled to support drive-throughs left and right. Within years, pharmacy drive-through was the standard rather than the exception – and the competitive advantage was long gone.
However, foot traffic began to rapidly decline. Why? Because fewer and fewer people had the need or motivation to go into the store. While prescriptions continued to grow front of store sales began to suffer with the lack of foot traffic. Discounting and increased couponing ensued but to little avail as customers learned to get their prescriptions through the drive-through, and most everything else – somewhere else.
We’re seeing the same thing happen in today’s grocery environment where competition is fierce among brick and mortar stores and also eCommerce retailers like Amazon. Customer expectations are high and evolving daily; they want a self-guided process with a menu of options. Not the least of which is delivery. The modern consumer loves delivery; a few clicks when it’s convenient for them, and their items arrive at their door. Meanwhile, third-party delivery services are exploding, facilitated by fast and modern mobile applications.
To compete in this environment, grocery retailers dive into delivery, both to home and at curbside. The cost is substantial, the human resource capital demanding, and the margins are often eroding. Yet the topline growth is tremendous, as online grocery sales continue to boom.
But for many foot traffic is down. Same store sales are down. Some chains are winning battles but losing the war.
However, some are coming out on top. Retailers with a healthy BOPIS mix fare better, as 81% of them report incremental purchases of 11%-50% when they get people in the store to pick up online purchases. In fact, over 40% of these retailers are seeing at least a 20% sales increase. The more things change, the more they stay the same, as old metrics like total store visits and visits per customer still apply. The end cap sells 25% more because enough of the right customers just walk by it and impulse kicks in. Get more online customers in the store and they walk by more end caps. Or get them the right offers at pick up and give them a revised shopping mission.
BOPIS is a fast-growing trend among retailers and consumers. In fact, studies show that consumer adoption for BOPIS has increased by 47 percent year-over-year, and 90 percent of retailers have committed to a BOPIS solution by 2021.
There is no denying that consumers want the goods they order online to be available immediately and the pickup process to be seamless and that is where our BOPIL™ retail solution comes into play. BOPIL or Buy Online, Pick Up In Locker, is specifically designed to make the retrieval of customers’ online orders – be it pharmaceutical prescriptions or medications, groceries and more – fast, easy and convenient. We offer refrigerated and fully customizable locker options to address the many unique needs of retailers and their customers.
This is not to say that grocery retailers shouldn’t seek to optimize their omnichannel solutions to include delivery and curbside. Shoppers do want options, convenience, and a great self-guided experience. However, for every online purchase that converts to BOPIS, there’s incremental sales and increased profitability to be had.
By Joe Szala, VP of Grocery
Joe Szala comes to Parcel Pending with more than 20 years of retail and grocery experience under his belt. He previously served as Senior Vice President of Retail Business Development at Aimia and Vice President of Business Development Retail Partnerships for Aisle50, which was acquired by Groupon in 2015. He is skilled at building both well established and rapid-growth and entrepreneurial organizations.