Las Vegas Review-Journal (Sunday)
Retailers are expanding curbside pickup service, but some analysts question the cost.
Retailers embracing pickup, but some question cost
Jessica Golonka said it’s hard to stick to her shopping list when she’s inside the Target store on South Eastern Avenue.
So for this trip the Henderson resident tested Target’s Drive Up service, where an employee rushed out to bring her groceries as she sat inside her car.
“This is the first time I’ve used Drive Up for Target,” Golonka said. “When I go to Target, I end up getting distracted by shiny things, so I thought this was the best way to get my errands done and get the things that I need quickly.”
Retailers like Target and Walmart are aggressively expanding their curbside pickup service to ensure their brick-and-mortar stores remain relevant, but getting the service off the ground has required significant capital, making some analysts wonder if it’s worth the investment.
For example, Walmart reported allocating
The same companies trying to get you to use self-checkout are offering to deliver. That’s two different strategies. When you do curbside pickup, you’re actually giving the customer a personal shopper. How does that make sense in a world where most checkout?’ of the money is being spent on getting people to do their own Nick Egelanian Founder and president, retail real estate consulting firm SiteWorks
15 percent more, or $3.8 billion, in capital expenditures on e-commerce and technology for the nine months that ended Oct. 31 than it did in the same period in 2018.
Nick Egelanian, founder and president of retail real estate consulting firm SiteWorks, predicts these curbside services won’t last, especially since retailers are still promoting self-checkout lanes to cut labor costs and improve margins.
“The same companies trying to get you to use self-checkout are offering to deliver. That’s two different strategies,” he said. “When you do curbside pickup, you’re actually giving the customer a personal shopper. How does that make sense in a world where most of the money is being spent on getting people to do their own checkout?”
But Cowen and Co. analyst Oliver Chen predicted in an April report that curbside pickup will blossom into a market worth $35 billion this year. He noted that curbside shoppers are younger and wealthier than the average U.S. consumer. For example, the average curbside shopper has an estimated annual income of $62,000, compared with the U.S. average of $57,000.
Walmart Chief Customer Officer Janey Whiteside said during an investor conference last year that the retailer is pushing grocery pickup and home delivery to attract younger, digital-first consumers. Egelanian remains skeptical. “It’s not that I don’t think it’s relevant,” he said. “It’s just relevant to a very small portion of the population. Those of us who live in urban areas, we see affluent people who really like this type of service … but 60 percent to 70 percent of America is living paycheck to paycheck. They’re not even participating in this.”
Special delivery
Retailers pitch curbside pickup as providing a seamless shopping experience.
Customers shop online — adding eligible products to their virtual shopping carts — and then head to their local store to pick up their items. They park in designated curbside parking spots, where a store associate will meet them at their vehicle and load their items into their car.
Best Buy CEO Corie Barry said during an earnings call last month that the chain recently introduced curbside pickup in select markets. Locally, Best Buy is testing the service at its stores on North Decatur Boulevard, on Marks Street in Henderson and on Arroyo Crossing Parkway in southwest Las Vegas.
“Our fulfillment options are all focused on providing customers with the choice and convenience they expect and deserve … whether you opt for delivery or store pickup,” Barry said.
Many retailers, including Target, Best Buy and Walmart, offer the service for free. Others, such as Smith’s and Whole Foods, charge a nominal fee.
Target shopper Marie Tactacan said she loves the service, particularly when she’s running errands with her 3-year-old and 1-year-old.
“I have two kids, so it’s hard to bring them both inside (the store), especially when they’re crabby,” Tactacan said.
At your service
To accommodate the influx of pickup orders, retailers have swelled their ranks. The Walmart store on Arroyo Crossing Parkway added 10 associates, who focus on grabbing merchandise off the floor to fulfill pickup orders.
Robert Bryson, Walmart’s e-commerce assistant manager, also added four seasonal workers to the curbside team this holiday season. “The more orders increase, if I have to hire more, I will hire more,” he said.
Store manager Jeremiah Wood said the store launched curbside pickup around July and has seen orders increase each month.
“Our volume right now is not to the point of stores that have been (offering it) for a year,” Wood said. “We’ll be there pretty quickly.”
Lizabeth Dunn, founder and CEO of retail data and forecasting firm Pro4ma Inc., said curbside pickup has required heavy capital investment by retail firms.
“I think many retailers are still working out the kinks,” she said.
Dunn cited Target as a company managing the service’s costs better than competitors. Target CEO Brian Cornell said two months ago that 90 percent of its cost “goes away” when customers pick up items in the store or use curbside or home delivery.
He also said the company has been able to reduce costs because online orders are fulfilled in the store, instead of being shipped from a distribution center.
Dunn acknowledged the high costs associated with rolling out services like curbside and home delivery, but she said it’s better than the alternative.
“If the alternative is losing the sale to a retailer like Amazon, then I think it’s smart to use the stores as an advantage,” she said. “Amazon has one-day shipping, but (traditional retailers) can get it to you today, and you don’t even have to get out of the car. I think that’s really smart, so I would expect more retailers to do that.”
Contact Subrina Hudson at shudson@reviewjournal.com or 702-383-0340. Follow @SubrinaH on Twitter.