Gap's Take On Typical Buy-Online-Pickup-In-Store Programs: Too Efficient

When Gap looked at buy-online-pickup-in-store programs, the president of Gap digital saw the programs that others chains have as very efficient. Indeed, far too efficient. It allowed the shopper to come in, get their merchandise and leave far too quickly. The chain on June 10 will launch its answer to this feature, something called reserve-in-store, and it is designed to get the shopper into the store and to keep them there for as long as practical.

Art Peck, Gap's president of growth, innovation and digital, said that this really what their shoppers want. "We're in a tactile business where people want to try things on, they want to feel things, they want to know that it looks good. Reserve-in-store, for us, depending upon the brand, is going to be a tremendous opportunity, number one, to get traffic in our stores that identifies themselves at the beginning of the shopping experience," Peck said. "That's a wonderful thing. And it allows us to then build a custom shopping experience around that. As a customer, that unit will be held for you through the end of the next business day for you to come into the store, try it on, build a transaction and an outfit around it and take it out of the store."

The most concrete difference between the two approaches is that Gap will force shoppers to pay for their goods in-store. After it's reserved online, the customer has until the end of the next business day to show up, pay and pick it up.

That's good for getting shoppers deeper into the store, but not so good for guaranteeing the sale. As Retail Systems analyst Nikki Baird said so well to an Internet Retailer reporter: "That's the risky part of reservations: losing a real 'right now' sale for the promise of a 'maybe' sale." Baird's fear is if there might be only one item left of a popular product and the store won't sell it to a shopper because someone on the Web reserved it, with no money down.

There is another risk. Not so sure that shoppers have the same contempt for convenience that Peck articulates. There will certainly be times when a shopper will want to buy a small navy-blue mesh raglan sweater and wants to grab it on the way home and may not cotton to the idea of being the center of your custom shopping experience. (Yes, I said "cotton" because it's an apparel story. Deal with it.)

Starbucks recently debated a similar question—"Is it better to get them in-store or to get a lot more people to visit the website or interact with the mobile app?"—and strongly came down on the side of "it's better to have them interacting digitally." Starbucks' rationale was simply that a percentage of those digital visitors will indeed end up in the store, which is far better than forcing them into the store. This is sort of the honey-versus-flypaper concept.This is Peck describing his personal experience with pickup-in-store: "Everybody says, 'Why don't you just do pickup-in-store?' Recently, I did a pickup-in-store with a large, well-known electronics company. And it was an amazing experience, and then I got a confirmation email 17 minutes after I placed my order that my order was ready to be picked up. I went into the store up Market Street, I walked in at 5:00 on a Friday afternoon, I identified myself, they found my order, and I was out of the store in four minutes. It's an amazing thing for me from a transactional efficiency experience in that store. It's a crappy thing if you're actually running the store, because you just missed an opportunity to build a shopping experience around the fact that I was in there, I've identified I wanted to buy and, but I was in there and I was gone in a heartbeat."

The strange part about that logic is there is nothing in any pickup-in-store programs that prevents—or even discourages—shoppers from shopping as long as they are there. The shopper simply asks the associate if they'd mind if they did a little shopping before picking up the reserved item. Instead of giving the shoppers incentives to opt for a more interactive experience, Gap is trying to squeeze the shoppers into complying. What may work online may not work well at all in-store.

During this investor meeting, Gap also described its global plan to move merchandise where it's needed. This is similar to what Macy's has been doing with its inventory, using the stores as distribution centers for the Web. But Gap's plan is to do it across countries, not merely states.

Gap CEO Glenn Murphy dubbed the global plan "seamless inventory," and he described it as liberating products that are locked into specific countries.

"Today, we have pools of inventory trapped around the world. It first gets trapped in a country. So Japan inventory, when the PO gets cut and goes to a vendor and it goes to Japan, it's Japan's inventory. It's trapped in Japan. Then it goes to stores, and it's trapped in 150 stores," Murphy said. "We're now going to unlock the power of our inventory where any unit that leaves a vendor should go to where that unit could be maximized the most. It starts with having a global assortment. So now we have stores where you can ship a unit from a store to satisfy an online customer. That's going to become seamless. Now the inventory can go anywhere. Now the inventory is untrapped. It starts with being untrapped by country. Because when it leaves the vendor, it will go to the country where we can maximize our sales, our growth and our AUR. Then the next step is inside of a country, you have to maximize that profitability. This is such a huge unlock for us. It'll take us a number of years. It's there to be done. It's not rocket science."

What is unclear is how the chain plans on dealing with customs fees each time those goods move from country to country, which seems unhealthy for margins.

Speaking of margins, Peck said reserve-in-store does need additional people to make it work well.

"We did put some incremental payroll in to support ship-from-store. And what we're doing right now is, having brought the model up and running the model, it's clear that the payroll pays for itself. It's got a tremendous return on it," Peck said, before adding that they have already started looking for ways to reduce that extra workforce.

"The second thing we're doing with the field leaders is starting to tighten the model up operationally and put the minimum amount of payroll in that we need to in order to drive this," Peck said. "The good thing about ship-from-store is it is the same operational capabilities, get the order, assign the order, pick the order, pack the order, absolutely applying exactly the same way to reserve-in-store, with the exception that there's a front-end customer experience you have to build on top of that, of the picking and packing process."

Gap execs also released some interesting online-offline stats. CFO Sabrina Simmons said that in-store still delivers 86 percent of all of the chain's revenue globally. Stephen Sunnucks, the global president of Gap Brand, said the online percentages change from country to country. "We have between 11 percent and 12 percent of our business online in the U.S. But when you look out internationally, in Europe, which is still, despite its problems, the largest of the power markets in the world, we only have 6 percent of our businesses online. And if you look at Asia, we've only just really got started. It's a big opportunity globally," Sunnucks said.