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

April 24th, 2013

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.


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