Ian Jindal, Editor in Chief of InternetRetailing, has invited Sophie Albizua to contribute a guest column on the 10th Anniversary of Click and Collect, a subject close to our hearts at Etail Towers. Sophie was a student in the first cohort of the MSc in Internet Retailing and is co-founder of the eNova Partnership, a multichannel consultancy. Prior to founding eNova Sophie spent 10 years as a retail & consumer investor and advisor at investment bank Goldman Sachs, and private equity funds Change Capital Partners and HgCapital. We're pleased to have Sophie's thoughts - let us know yours in the comments.
[caption id="attachment_19268" align="alignleft" width="118" caption="Sophie Albizua - cofounder of eNova Partnership"][/caption]
Click and Collect 10 years on.
We are in 2011 and Argos is still winning “Multi-Channel Retailer of the Year” Awards ten years after it launched the first Click and Collect service in the UK. Let’s take this anniversary as an opportunity to review the state of one of the most successful retail inventions of the 21st century’s first decade. No need to speak to the experts - a trip to one of Sainsbury’s trial Click and Collect stores with “Collect in Store” placarded on giant banners, leaflets and staff T-shirts seems enough to suggest that the concept that seemed so revolutionary in the early 2000s has finally become mainstream.
Click and Collect (“C&C”) and its sister brands or concepts “Reserve & Collect”, “Order & Collect”, “Order online, collect in store”, broadly refer to the ability for the customer to reserve or purchase a product online and collect it in person in a physical store (rather than having it delivered home). With the active use of at least two touchpoints in the purchasing process, C&C epitomizes multichannel retail.
The importance of multichannel retail need no longer be demonstrated and new statistics on its size and growth are accumulating like open invitations for retailers to join in: “78% of consumers use two or more channels to shop” (ATG), “cross-channel sales will reach 38% of total retail sales” (Forrester), “36% of sales will be web to store by 2020” (Javelin), or “44% of non food transactions by value are digitally influenced and 20% are multichannel” (Deloitte).
In parallel, new research continues to confirm how much more profitable C&C customers can be. Research from John Lewis, Halfords, Waitrose and New Look amongst others demonstrates that on a yearly basis, customers using several channels to complete their purchases are worth 2 to 8 times more than customers using a single channel. Even on a single transaction basis, recent research from Deloitte indicates that multichannel consumers spend 82% more per transaction than customers who only shop in store.
In spite of these compelling arguments, the number of UK retailers having implemented Click & Collect remains low a decade after launch. According to eNova’s internal research, only 30% of the multichannel retailers listed in Retail Knowledge Bank’s top 200 list have implemented C&C services. If we were to plot that on the Roger’s innovation diffusion curve, we’d be midway through “early majority”. John Lewis only launched click and collect services in 2009 and Marks and Spencer their “Shop Your Way” concept in 2010.
Why has adoption been so slow?
The many practical challenges to C&C have surely been one barrier. The list of questions for retailers to consider would be too long to detail in this article but include: do I pick products from store shelves or from warehouse? Do I have good enough stock accuracy to ensure a product reserved online has not flown off the shelf in the meantime? Are my eCommerce platform and back end systems geared up for C&C and the demands of integrated data? Should customers pay for the item online or in store at collection? How long do I give them to pick up their orders? Does it cannibalise other parts of my business and who gets credited with the sale?
The more likely reason for slow take-up is that with improvements in other areas of ecommerce yielding a minimum of 15% market growth rate, and mobile and social gathering equally exciting momentum, it has simply not been a priority.
The question is, what are non-adopters missing?
The most recent results from 4 national multichannel retailers with C&C demonstrate the missed opportunity:
- Argos (C&C launched in 2000):
Argos remains the only example of the longevity potential of C&C. In round numbers, total sales from the online channel are now worth £1.3bn and 30% of sales, having grown at 40% per annum over the past 7 years. Click and collect represents 70% of that at just under £1bn in sales, and has grown at an astonishing 60% per annum since 2003. To put things in perspective, online market growth rate over the same period has been around 25% per annum.
- Halfords (C&C launched in 2008):
Reserve and collect penetration has reached an impressive 80% of online orders 2 years after launch.
- John Lewis (C&C launched in 2009):
John Lewis’ online sales for their last year end reached a little over half a billion and 17% of sales, of which eNova estimates C&C represents 20-30% already growing at well over 100% p.a.
- Marks & Spencer (C&C launched in 2010):
At M&S’ freshly launched “Shop your Way”, 13% of online orders are said to be collected in store making C&C a business potentially worth over £50m annually.
Are we correct to attribute these successes to C&C?
There is without a doubt some level of cannibalisation occurring between channels. However, it is counterbalanced by three factors:
- On average 30-40% of customers pick up something extra in store as they are collecting their orders. At John Lewis, this argument alone suffices to justify potential cannibalisation. At Argos where there is nothing much to pick up, “non online sales” do show worrying trends at minus 6% per annum over the past two years
- Customers are increasingly switching to retailers offering integrated C&C services as the limitations of home delivery take their toll. For many, waiting at home for a parcel to arrive or queuing at a depot to pick it up is simply not practical and the convenience of the C&C model, allowing the customer to pick up their product at their convenience, is a true differentiator. The old “share of wallet” metric has never been so relevant and it is no surprise that pure plays like ASOS are now trying to find collection points to keep their customers.
- Click and Collect is, when well executed, the cheapest fulfillment method for online orders by a long way.
Experience has shown us at eNova that investment payback on C&C implementations should be well within a year and we are yet to find an example where C&C is not continuing to grow well above market rates generating high level of enthusiasm from companies’ Boards and their customers alike.
To those of us who’ve been observing the industry for a while, Click and Collect can feel like a dinosaur in comparison with more recent developments like mobile or social. Yet it is surprising how many retailers are yet to embrace the opportunity. With data proving its success accumulating over the years, it remains one of the most proven ways to embrace multichannel retailing and one of the best tools to remain at the forefront of the growth pack in an increasingly challenging retail environment.