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Same-Day Service for Online Shoppers: More Home Delivery, In-Store Pickup

This year, online holiday shoppers want it now.

They are expecting more, after last holiday season when overpromising retailers, overburdened carriers and bad weather caused many packages to arrive late under the tree.

Retailers are poised with two get-it-now solutions. Shoppers can buy online and pick up in stores, the more widely available same-day option. Or, they can get same-day home delivery, the Holy Grail of e-commerce.

Once the domain of restaurants and florists, same-day delivery has expanded to tech giants like Google, and Amazon is experimenting with bike messengers and drones. Meanwhile, stores like Macy’s, Bloomingdale’s, and Neiman Marcus are getting in on the game, offering some online shoppers that same-day gratification, either at no charge or for a nominal fee.

Because this is still new territory, and limited to a few test areas around the country, many retailers aren’t heavily promoting the new service as they work out the kinks. Macy’s Inc. began offering same-day delivery from a handful Macy’s and Bloomingdale’s stores in late October. Outreach to customers, via email and text message, has been limited to those markets, a spokeswoman says. “We don’t highly market it because we want to make sure that we are not going to disappoint, and we are going to live up to the expectations,” says Martine Reardon, chief marketing officer at Macy’s.

Shoppers in designated areas, including Northern New Jersey and Northern California, can pay $5 plus the cost of standard shipping for same-day delivery. Orders placed before 1 p.m. (11 a.m. on Sundays) arrive that same day; orders placed later are delivered the next day. “Time is currency today,” Ms. Reardon says.

Home delivery is a serious game-changer for holiday procrastinators. But before retailers can venture there, they have to get a handle on in-store pickup. Shoppers like how it saves time and shipping charges, and, in some cases, offers them the chance to try on merchandise before purchasing.

These same-day services are hard for stores to execute. Retailers need to have a precise, real-time view of the merchandise in stock and to train employees how to find, pull and deliver merchandise. Companies are investing in these capabilities in hopes of winning loyalty from finicky shoppers and finally proving they have merged their online and store operations.

With each new level of service, though, shoppers raise their expectations. Marisol Fernandez, who lives in Bayside, N.Y., didn’t want to pay the shipping charge on new pajamas for her son, so she ordered online and picked them up at a Macy’s nearby. “It looked like somebody had tried it on,” the 43-year-old says. She says she wished she’d had the item shipped from a warehouse, so it would have arrived wrapped in plastic “and no one would have touched it.” (A Macy’s spokeswoman says, “We encourage customers to look over their item at pickup to ensure their complete satisfaction. Customer satisfaction is top priority, and we will gladly replace any item.”)

Same-day home delivery is still a novelty, and customers may be more forgiving. Christopher Lee, a 29-year-old marketing professor in Philadelphia, doesn’t own a car and needed toys quickly for a fundraiser last week. He ordered from Amazon, where he is an Amazon Prime member, and found four of seven toys, including a Disney “Frozen” doll set and a Lego tow truck, were available with same-day delivery. “It was great,” Dr. Lee says, not minding that the other three toys took longer to arrive. “For $6, I had some of my items in 15 hours.”

The more commonly offered option to buy online and pick up in store—known in the industry as “BOPIS”—is an important step for retailers toward “omnichannel” operations, or integrated online and in-store inventory.

Gap Inc., operator of Gap, Banana Republic and Old Navy stores and websites, began inviting Web and mobile shoppers last year to “reserve in store.” The shopper reserves an item and a specific pick-up locationusing one of the brand websites or apps. An employee picks the item from the selling floor and scans it to confirm the size and style. Shoppers receive an email or text when the order is ready.

Reserve-in-store customers tend to use the service either to get in and out of the store fast or to jump-start a bigger in-store shopping quest, says Sol Goldfarb, Gap Inc. senior vice president of digital platform strategy and product management. Pants, jackets and other items where fit is particularly important have been especially popular in the program, he says. Gap benefits by “deepening the relationship” with existing shoppers, Mr. Goldfarb says.

Loyalty is more important to stores than ever, as shoppers visit fewer brands and stick with ones they have previously chosen, says Steve Barr, U.S. retail and consumer leader at PricewaterhouseCoopers. “They are going back to those brands that they know and love the best.”

In-store pickup works well with “webrooming,” when consumers research online before heading to a store. At Neiman Marcus, about 70% of shoppers research online before coming into the store, says John Koryl, president of Neiman Marcus stores and online. Most of the luxury chain’s in-store pickups occur within three or four hours of the order. “They want that immediate gratification,” Mr. Koryl says. Neiman Marcus and some other luxury retailers have long offered their top customers home delivery among other personalized services.

A statistic retailers watch closely is the “attachment rate,” the proportion of in-store pickup shoppers who buy something else while in the store. Mr. Koryl says while Neiman Marcus’s attachment rate isn’t as high as he might have expected, the value of attachment purchases is very high.

Neiman Marcus has new customers pick up purchases at the customer service desk. Regular customers can specify where they want to pick up—which can raise the potential for impulse buying. Wouldn’t a customer picking up a shoe order in the shoe department be tempted to browse other shoes?

Macy’s and Bloomingdale’s work with Deliv, a Menlo Park, Calif., startup that calculates how to make same-day delivery cost-effective. The company also has contracted with six major U.S. mall operators, who play a role in same-day delivery at department stores and other stores. After each store handles picking and packaging, the mall dispatches runners to move the packages and stow them near a mall entrance that Deliv drivers can access easily.

To make same-day delivery cost effective, Deliv looks to aggregate pickups and deliveries, says Daphne Carmeli, Deliv’s founder and chief executive. Sending one driver to pick up one package and deliver it in one hour would cost between $20 and $22. When the driver picks up and delivers two packages, those costs are halved. “It doesn’t take much pooling to get down to this disruptive price,” Ms. Carmeli says.

This year, many retailers are choosing to pass along to shoppers only some of their costs for same-day delivery. Many malls Deliv works with offer the service free of charge.

Deliv drivers, a contracted workforce, typically work between 15 and 25 hours a week, the company says. Mitch Sremac, a 61-year-old Chicago retiree who has been driving for the company for about two months, says he likes the flexibility and the feedback from customers. “The other day I had a woman say, ‘I can’t believe I could have this here so quickly,’ ” he says. “I get that all the time. They are amazed.”

See the original article on the Wall Street Journal here!

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