Many retailers offer customers the option of picking up online orders at their local store. Done right, this option can save customers time and eliminate shipping costs if the order doesn't qualify for free shipping. But it can backfire if it's implemented poorly. If orders aren't ready when customers arrive, or if there's a long wait, they may shun the service, or even take their business elsewhere.
Walmart (NYSE:WMT) has been rolling out a slew of new services over the past year or so to compete with Amazon.com (NASDAQ:AMZN). The latest is an expansion of the company's automated pickup towers, which are billed as a way to make the pickup process faster and simpler. After a test run in nearly 200 stores, Walmart plans to add the towers to another 500 stores this year, along with pickup lockers for larger items.
Leveraging its stores
Walmart's pickup towers aim to remove as much friction from the pickup process as possible. When customers arrive at a store after being notified that their order is ready, they scan a bar code on their phone at the pickup tower. Their package is then moved down the tower automatically to the pickup window, ready to go within seconds. Each new pickup tower will also feature pickup lockers for larger items.
This initiative has so far been a success. The initial batch of pickup towers installed over the past year have served over a half million orders, enough to convince Walmart to more than triple the number of pickup towers. After the expansion, which is scheduled to be complete by the end of the year, about 40% of the U.S. population will live near a Walmart store equipped with a pickup tower.
This move builds on Walmart's other efforts to leverage its stores to grow its e-commerce business. The company's online grocery pickup service, where employees assemble grocery orders placed online and load those orders into customers' vehicles, is available at about 1,200 stores, with another 1,000 stores in the pipeline. The company is also rolling out its grocery delivery service to about 800 stores this year, using the same in-store shoppers for order assembly and third-party services for delivery.
Convincing customers to pick up orders at a store makes sense for Walmart. Shipping an order to a store using existing distribution systems, or even fulfilling the order from the store's inventory, and then placing it in a pickup tower is cheaper for the company than shipping the order to a home. That's doubly true now that Walmart offers free two-day shipping on online orders over $35. Walmart's fourth-quarter results were blemished by a steep rise in costs, due in part to a mix shift toward e-commerce.
Not the only lockers in town
Amazon also offers lockers in over 2,000 locations, including some Whole Foods stores. Customers can opt to have their Amazon orders delivered to a locker instead of their doorstep, a useful feature for those concerned about packages sitting outside when they're not home.
Walmart's pickup towers and lockers offer the same benefit, along with potentially faster turnaround times. While an Amazon order will still take two days with Prime to arrive at a locker (or longer with a slower shipping method), an order from Walmart could be fulfilled from the store itself if the items are in stock. In some cases, a Walmart order will be ready to be picked up on the same day.
Walmart has been on a mission to make shopping at its stores and on its website more convenient. The expansion of its pickup towers and lockers is another step in that direction.