Risks and Rewards: Reserve and Collect

WM Circle Logo

By: Wise Marketer Staff |

Posted on December 15, 2015

Reserve and collect is the latest offering in the now complex, omni-channel retail model, with recent research showing that 63% of retailers currently offer the service. But retailers need to carefully consider the risks and rewards: will the incremental sales achieved as a result of being able to offer guaranteed product availability outweigh all the additional costs, asks Eric Fergusson, Head of Retail Services for eCommera.

With only 25% of retailers seeing a strong return on investment for their omni-channel efforts, retailers need to understand the end-to-end implications of reserve and collect, from distribution costs to staff morale and customer perception.

Retailers are rushing to offer a reserve and collect service in response to perceived customer demand; indeed, 64% of retailers claim this to be the basis for all of their omni-channel decisions. Of course, the concept appeals to customers, with the convenience of knowing that an item will be in-store and no need to pay up front. This channel also offers benefits to retailers - not least another chance to gain differentiation from the pure play providers. Enticing customers in store provides an opportunity for cross-selling, as well as enabling a retailer to deliver an added value customer experience - a key consideration particularly for luxury retail environments. It also offers a chance for those retailers with fragmented stock or poor availability to improve the quality of the customer offer.

But have retailers learnt nothing from the history of omni-channel to date? As recent research reveals, less than half of retailers think they are doing a good job at omni-channel - and 66% admit to starting omni-channel services without understanding the end experience. Critically, potential ROI is at the bottom of a retailer's list when it comes to planning new services.

The cost of reserve and collect can be significant - and it extends far beyond the most obvious expense of moving goods from warehouse to store. With retailers reporting upwards of 50% customer no-show on reserve and collect orders, incurred costs include moving the item, lost sales opportunities while the item was on hold for the customer and a very real risk of adding to the number of discounted items at season end, especially for fast-paced industries such as fashion.

It is also important to consider the overall customer experience - both online and in-store. With no consistent terminology in the market today, customers can be confused by the reserve and collect versus click and collect options, a confusion that can affect conversion. Retailers also need to consider whether there is enough room in-store to hold this reserved stock - and for how long. How should in-store staff manage the reserve and collect customer to deliver the best possible experience, without compromising the experience of traditional, browsing store customers?

Each retailer's risk/reward model will be different. For luxury goods providers enjoying high margins, the cost of moving goods from warehouse to store is a fraction of the overall product value and provides a chance to deliver a differentiated customer experience. For a book seller, in contrast, the distribution cost alone might be 20% of the product's retail value; add in the no-shows and other costs and the ROI becomes less compelling.

Of course, there is one way of drastically reducing costs - and that is by fulfilling reserve and collect orders in-store. This can only be achieved if a retailer has an accurate and complete view of stock across every channel. With a single view of real-time stock, a retailer can not only optimise stock allocation to match stock availability with reserve and collect demand, but also improve the customer experience by showing current stock levels on the website.

Research shows that reserve and collect has fast become a popular choice among retailers; a total of 82% of retailers are either currently offering the service, or will be in three months' time.

"Retailers must still tread carefully when it comes to reserve and collect, making sure to balance the potential risk and reward," concluded Fergusson. "Reserve and collect undoubtedly offers great benefits for retailers and customers alike; the challenge is to carefully assess just how much value it will offer to the overall business."

More Info: