Walgreens has jumped on board with click and collect (WBA)

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Walgreens has joined a bevy of other legacy retailers in offering a click and collect service, which has the potential to turn its massive fleet of brick-and-mortar stores into revenue drivers for its online ambitions.

The program, dubbed Ship to Store, will allow online and mobile users to opt to pick up their orders in one of 7,600 Walgreens stores. Items do not incur shipping charges and arrive within one to three business days. 

Walgreens' new initiative has the chance to be successful for a number of reasons.

• Expanded inventory: Customers can order items that are not usually featured in Walgreens stores, which gives the company an opportunity to drive higher sales due to the expanded inventory selection. 
• Improved inventory planning: The program is designed so that customers order ahead of time, which could help minimize situations in which a shopper can't find a desired item on the shelves. Instead, Walgreens can wait for a customer to request an item before stocking it. This could boost customer satisfaction, ultimately pushing up sales. 
• Densely situated stores: Seventy-five percent of the US population lives within five miles of a Walgreens store, providing its customers with ample pickup locations in their respective regions. 
• Incremental spending: Click and collect can drive incremental sales gains if a customer decides to pick up additional items once they enter the store. 

Other legacies, including chief rival CVS, are already pushing click and collect. CVS expanded its click and collect service, CVS Express, to stores nationwide in September. Meanwhile, other retailers have already established themselves in this area — Sam's Club, for example, generated over 30% of its e-commerce sales through in-store pickup in 2015. Click and collect is a clear way for retailers to transform their costly physical store space into a revenue driver for online sales, essentially turning brick-and-mortars into fulfillment centers for online orders.

This is a vital time for CPG retailers to shift to digital as shoppers increasingly turn to e-commerce for these repeat purchases. Total US online sales of consumer packaged goods increased 42% in 2015, according to 1010data. This is compared with 30% growth for the e-commerce industry overall, and just 0.6% growth for offline CPG sales. Walgreens' omnichannel strategy will likely help the company capitalize on this growth to increase online sales in the CPG category. This could lead to meaningful sales gains for the company, given the regularity with which customers purchase such items.

Click and collect — a fulfillment option that lets shoppers place an online order and pick it up at a store — is thriving in the UK.

Over half of UK shoppers report having used this method in the past year, according to a survey from JDA & Centiro conducted in April 2016.

However, the US is far behind on the click and collect trend, with just 27% of consumers using the service. This is largely due to slower growth in mobile commerce, and specifically, the hesitancy shoppers feel about using mobile retail apps.

Retailers in the US can look to the growth drivers in the UK to help drive up their own click and collect sales. Most notably, mobile commerce and adoption by grocery chains are driving shoppers in the UK to use click and collect.

Nancee Halpin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on click and collect that breaks down the growth factors behind click and collect in the UK. It also discusses the retailers successfully implementing the fulfillment method, examines the of impact consumer behavior, and outlines some key steps that US retailers can take to replicate the UK's performance.

Here are some key takeaways from the report:

• The UK's click and collect market is expected to grow 78% by 2020, to £8.2 billion ($10.6 billion). Meanwhile, it is expected to reach £5.3 billion ($6.8 billion) by the end of 2016.
• Click and collect is benefiting from consumer adoption of mobile commerce in the UK. Mobile is a fundamental driver because it affords consumers more flexibility in the purchasing process. As a result, many UK consumers are purchasing goods on their mobile phones, and then picking them up on the way home from work, the gym, appointments, etc. 
• The service is particularly popular among grocery chains, with many of the UK's largest supermarkets offering click and collect. Since trips to the grocery store are made frequently and regularly, click and collect is a perfect fit for shoppers who want to avoid recurring issues like long checkout lines and crowded stores.
• To grow click and collect in the US, retailers need to invest in their mobile presence and dedicate in-store resources to click and collect shoppers. Merchants should do more than just recreate the desktop browser experience on a mobile app — this includes employing tools like mobile loyalty programs, digital coupons, and social media integration.

In full, the report:

• Sizes the market for click and collect in both the UK and the US.
• Identifies the key growth factors that are making click and collect successful in the UK.
• Discusses key players in the UK that are seeing success with click and collect.
• Presents some of the challenges the US faces in spurring adoption.
• Outlines future opportunities for US retailers to grow sales via click and collect.

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