As the relationship between retailers and their customers becomes increasingly virtual, many businesses are looking for new ways to cut costs and increase profits.
The latest idea being touted is to offer customers discounts if they come in to pick up the purchases they make online, rather than having them delivered to their homes.
This “last mile” delivery to a customer’s home — via UPS, FedEx, or even the US Postal Service — is the most expensive part of fulfilling any online order. So when businesses can eliminate this step by having customers come to them, rather than the other way around, they can pass the savings onto consumers.
Wal-Mart’s Master Plan
Wal-Mart is rolling out a program that does just that.
Last week, the world’s largest real-world retailer announced that it will soon debut a “pickup discount”, offering reduced prices on more than 1 million online-only products to customers who agree to pick up their purchases at their nearby store rather than having them delivered to their homes.
It’s the latest move by Wal-Mart to cut into the growing market share of Amazon, the world’s largest online retailer, which offers free delivery to its Amazon Prime customers and is working toward same-day delivery — or even same-hour delivery — for its online orders.
Wal-Mart’s biggest advantage over Amazon right now is its vast network of brick and mortar stores. Nearly every large- and medium-sized city has a Wal-Mart, as do thousands of small towns and rural areas.
The Bentonville, Arkansas, based company already owns its delivery network of trucks that supplies these stores, so it can more easily afford absorb the discount to customers who opt to eliminate its “last mile” delivery costs.
Applications for Other Businesses
While discounting in-store pickups of online orders make sense for Wal-Mart, could it benefit other businesses as well?
It all depends. No comany has the physical market saturation of that Wal-Mart enjoys. But most businesses also don’t have Amazon’s network of distribution centers and delivery vans, either.
Amazon also has a network of on-call people who use their own vehicles to make package deliveries in their own neighborhoods and is even reportedly developing a robot drone army to airdrop packages directly to its customers front porches.
As the sea change toward online ordering continues to build, it’s going to be challenging for businesses to compete with the massive resources and investments that huge companies like Amazon and Wal-Mart can tap into. Yet in order to be competitive, they will have to try.