Written by Michael Puline – Vice President of National Accounts
As the 2024 back-to-school shopping season packs up its pencils and heads home, one thing is clear: retailers that invest in well-merchandised, conveniently located stores are absolutely crushing it. This year, major retailers like Walmart, Costco and Target — are pulling further ahead. And guess what? It’s not just low prices that are winning the day.
When you imagine retail shopping, you might picture the classic “grab and go,” but let’s be real—it’s more like “grab, dodge, duck, swerve, U-turn, and go.” From navigating around a coach who thinks practice can run late (again), to avoiding a broken security gate in your community, and praying for a parking spot that doesn’t have you squeezing out like a contortionist, the customer journey is more like an episode of The Amazing Race.
But I digress. Let’s dive into some personal experiences—with two of the biggest players in the game.
First up, Target. My oldest son recently needed a Texas Instruments calculator. Yes, you read that right—those things still exist! It was one of those crazy order “I need it by tomorrow, Dad” moments that all but curbed my enthusiasm. Enter Target’s “Drive-Up” service, the superhero of “On-Demand” shopping. I placed the order, and within an hour, that calculator was ready for pick-up 10 minutes away. The whole process, from parking to receiving the goods, took all of 74 seconds. I know because I timed it—iPhone stopwatch and all. In a world where every minute counts—especially when you’re juggling work, new babies, football practice, science projects, avocado cuts, dinner and the general chaos of life—this kind of service is “Gold Jerry, Gold…”.
Now, let’s talk Walmart. My family recently got hit with the COVID bug—because, of course, we did; back-to-school season this year wouldn’t be complete without it. While we were in isolation but still in need of essentials (BodyArmor, Liquid Death Mountain Water, Lysol, watermelon, more COVID tests, masks—the usual), I decided to give Walmart Plus a whirl. It had been a while, so I figured, why not time the delivery? From the moment I hit ‘order’ to the moment the goods hit my doorstep, it was a mere 41 minutes. And get this—the store is 5.8 miles away. Even on my best day, emulating Mario Andretti, hitting all green lights and breaking a few laws of physics, I couldn’t have made the round trip that fast. Suffice it to say, Walmart saved the day, and more.
Retailers who can leverage their store assets are winning big, and what’s more, they’re doing so at scale with growing margins. We’ve all heard the endless debates about how hard it is to make eCommerce profitable. The truth is, growing customer acquisition costs (those digital rents paid to Big Technology), the dreaded last-mile shipping costs and high return rates make it tough to compete in this new world of retail—unless you’ve got a physical store right around the corner from your customer.
But convenience isn’t the only thing driving retail success this season. Demand is strong, and the best retailers are absolutely nailing it with merchandising. They’re ensuring that the right products are not just available, but practically jumping off the shelves into customers’ carts (both physically and digitally). Whether it’s school supplies, clothing, or tech gadgets, the retailers who make it easy to find and buy what’s needed are the ones that are schooling the competition. And none are doing merchandising better (in my humble opinion) than the leading Off-Price (TJX, ROST, BURL) retailers. Why? Because they have to… They offer no online shopping or visibility as to what’s in store, so in order to continuously get people in that door, they must be well merchandised. They must have the products people want to buy. On a scale of one to ten, with ten being the best, they’re a solid 9. How do I know? Because people happily stand in lines and wait for 9s—they don’t do that for 6s and 7s. Don’t believe me? Just swing by T.J Maxx on a Saturday afternoon. Retail merchandising isn’t rocket science, I can sum it up in one phrase: “People don’t pay for average.” If you’re selling average products, at average prices, in average locations, with average service, your results will be—wait for it—about average.
The 2024 back-to-school season has taught us one big lesson: retailers who mix convenience with great merchandising are the real MVPs. As families continue to juggle hectic schedules, those who make the shopping experience seamless and efficient will keep winning. This is exactly why Target has such a stronghold in my community—two stores within a five-mile radius of my home, each one a beacon of retail convenience.
Looking ahead to the holidays, I expect sales to remain strong. Walmart recently reported stellar results last quarter with robust guidance, noting a significant uptick in their home delivery program. With advancements in technology, it’s becoming clear that one of the biggest beneficiaries of growing eCommerce and now Generative AI is the physical store itself. How big of a beneficiary, you ask? Well, let’s break down the last few years. In 2019, eCommerce store delivery amounted to $33.6 billion in Gross Merchandise Value (GMV). Fast forward to today, and that number has skyrocketed 5.3X to $179.2 billion over the past twelve months. And… When you factor in BOPIS (buy online, pick-up in-store) or other options, eCommerce fulfilled by stores now accounts for nearly one-third of all eCommerce. And just a few years ago, it was barely a fraction of that.
Why is this trend such a winner? Two reasons: 1) Cost. It’s far more cost-effective and environmentally sustainable for both the retailer and the customer to fulfill an eCommerce order when it’s coming from a nearby store—even drones would agree. And since last-mile delivery makes up the majority of total fulfillment costs, it’s a no-brainer that retailers with stores close to their customers are coming out on top. 2) Convenience. Sure, online marketplaces have made tremendous strides in delivery times across their networks, but they can’t compete with the speed of a store that’s just down the street, even if they do drive like Mario Andretti.
The key takeaway here? Retailers need physical stores near their end customers to meet the retail needs and desires of today’s consumers. And lots of them…