Retailers Encourage Shoppers to Buy Online and Pick Up In-Store
As online shopping has surged, traditional retailers have lost millions in sales to so-called showrooming — when shoppers check out products in stores that they then buy from Web sites like Amazon.
Context & Ripple Effects
The New York Times' report on retailers steering shoppers toward buy-online-pickup-in-store landed amid unusually broad pickup — Fortune, Marketing Pilgrim, and Beyond Search all carried versions on or about July 5, 2012 — a signal that showrooming anxiety had spread well past one beat reporter's desk. The confirmed framing behind the story: traditional retailers have lost millions in sales to Amazon as shoppers inspect goods in stores and complete the purchase online.
Amazon enters this moment from several directions at once. Days earlier, an outage of its Elastic Compute Cloud in North Virginia had taken down Netflix, Instagram, and Pinterest, underscoring how much consumer internet runs on its infrastructure; in late June it applied to control 76 new domain extensions including .amazon and .kindle. Reports that Amazon is developing a smartphone to vie with Apple's iPhone and Android devices remain unconfirmed, but they fit the pattern of a rival contesting every layer between shopper and sale.
First-order effects
- Traditional retailers convert store visits that were leaking to Amazon into completed sales on their own books, directly clawing back some of the millions showrooming has cost them.
- Amazon loses the marginal transactions it had been capturing from shoppers who browsed in-store but checked out on its site.
Second-order effects
- Pickup-in-store forces traditional retailers to run each location as a fulfillment node, pressuring them to hold accurate real-time inventory and to reconcile in-store prices with online prices at the point of handoff.
- Amazon's parallel moves — the .amazon and .kindle domain applications and the unconfirmed smartphone reports — suggest it will compete for control of the shopping interface itself rather than concede ground to retailers' channel defenses.
Third-order effects
- If buy-online-pickup-in-store becomes standard practice, the line between e-commerce and store retail erodes: physical square footage gets judged partly on fulfillment value, not just walk-in sales, reshaping how retail space is valued and staffed.
- Retailers gain cross-channel visibility into shopper behavior they previously split between two silos, strengthening the data position of any chain that executes the model well — an advantage that compounds against pure-play online rivals.
The trend: Retail is converging its digital and physical channels, with stores repositioned as fulfillment nodes in an escalating contest with Amazon over who completes the sale.