Why Retailers Prefer “Ship to Store” Over Plain Old Shipping to the Customer’s Home

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During the past winter holiday shopping season, free shipping was a big trend. Retail giant Walmart, for instance, offered free shipping on some 60,000 items. Now, instead of continuing to expand free shipping services, Walmart is ramping up its “ship-to-store” program, in which shoppers order merchandise online that they’ll later pick up in a store location. Why?

First off, why do stores offer free shipping? Duh, because it seems like a “very special offer”—one that’ll entice customers to buy. But free shipping is often a false saving strategy, duping consumers into purchasing something they don’t really need, or that’s not being sold at a good price even when free shipping is factored in. In lab studies, free shipping promos have been demonstrated to make consumers do some pretty wacky things: Participants were four or five times more likely to pay $5 for an item with free shipping than they were to buy the same item for $2.50 when shipping cost an extra $2.50. Perfectly logical, right?

Now, on to the ship-to-store concept. For one thing, Walmart is expanding the service to all of its 3,6000-plus locations simply to compete with retailers like Best Buy and Sears, which have been offering these services for some time now. The “Pick Up Today” program, as it’s called, allows customers to make purchases online that’ll be ready to pick up a few hours later in the same day at a Walmart store. Morningstar retail analyst Peter Wahlstrom explained the upside of this service in an AP story about Walmart’s newly expanded service:

“It saves you time as you get to the store,” Wahlstrom said. “You can make the beeline directly to checkout, and that creates efficiency on both ends,” for shoppers and retailers.

So this is all about efficiency. Or is it? Shipping directly from the warehouse to the customer’s home is even more efficient for both shoppers and retailers, of course. So the goal here isn’t to create an entirely efficient shopping experience for consumers.

Plainly, Walmart wants to get bodies inside its stores, so that they can walk the aisles and be tempted into buying all sorts of goods they never would have purchased online. Most consumers are comfortable buying certain items online, but for other merchandise they prefer to see it and feel it in person before agreeing to make the purchase. Walmart’s newly expanded service tries to bridge the gap between online and in-person shopping—and double (or triple) the amount each customer will buy in the process.

The truth is that while ship-to-store can make the shopping experience more efficient, Walmart never really wants any customer to “make the beeline directly to checkout.” Doing so would leave out the possibility of impulse purchases.

In a NY Times story, a Walmart executive states flatly that one of the goals of ship-to-store is (obviously) to get more customers physically into the stores:

“Not only do we see it as a nice convenience for customers, but we also saw it as a way to drive incremental traffic to the stores, and incremental sales,” said Steve Nave, senior vice president and general manager of Walmart.com.

Walmart isn’t selling all of its goods via the “Pick Up Today” service. Groceries aren’t included, for one thing. Nave gives the company line why that is so:

“What we’ve tried to do is focus on those categories where customers are most likely to be willing to make the purchase before they touch it or look at it. This is a convenience play, and trying to figure out what are the things that are going to drive more customers into the stores.”

So is this about the convenience of your customers? Or is this about driving more customers into the stores? I suppose it’s a little of both, but if the goal here was maximum convenience, customers would be able to order anything (groceries included) online and pick them up a little later at the store, without having to waste any time walking the aisles to find milk, butter, coffee beans, and whatnot. If groceries were included in the service, perhaps customers really would be inclined to “make the beeline to the checkout”—and that’s the last thing Walmart wants.

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