How do pickup lockers work?

As online and offline commerce are getting closer to each other and customers schedules are getting more and more crowded, pick up lockers seem to become more useful and popular. Ever asked yourself – how do pickup lockers work? 

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They are versatile, easy to use and something customers need from online and in-store retailers. So let’s dig in and see how they work and who should use them.

What is a Pick Up Locker?

First off – what is a pick up locker? Simply put it is an area of lockers where retailers can drop off merchandise and customers can pick it up. Amazon has been a pioneer in this field, with Amazon Lockers opening up the gates to a new type of fulfilment.

The pick up lockers work by assigning a specific location to packages and sending pick up codes to customers. The customers can then go to their designated pick up location, enter the security code and grab their packages.

After Amazon has built their first experimental pick up lockers, others soon followed.

Some of those that developed their own systems of pick up (and ship) lockers are 3PL companies. For example FedEx and UPS have developed quite advanced pick up and drop off locations. UPS has named theirs “Access Points” and they’re building a network able to sustain growing demand.

FedEx has developed a network of “Ship&Get Self Service Lockers“. With their lockers one can drop off items for shipment or receive packages.

Both are growing really fast and soon others will follow suit. Even startups have ventured in this area with some highlights being Swapbox, an Y Combinator startup and Bufferbox, a company that was recently acquired by Google. However, due to the fact that this is a very competitive, capital intensive niche, both startups are now dead.

So yes, they are popular but how do pickup lockers work, especially from a retailer point of view?

How do pickup lockers work for large retailers?

One very specific use case for the pick-up locker system would be large retail chains. For example Walmart announced their Grab & Go lockers following their Site to Store Self Service Lockers experiment.

Apart from the internal fulfilment challenges, retailers need to focus on some key aspects regarding the development and implementation of such pick up locker systems:

1. How can pickup lockers be secured?

For obvious reasons there needs to be a secure access to shipped goods. To do so each drop off will have to issue a security code that can be decrypted and accessed with the private code the customer will receive.

The systems will also have to have fall-back security systems such as video surveillance and locking systems in case of hacking attempts (there will be some).

Security code should work online but also have a fall-back local solution that can work in case internet connection is off.

2. Connecting the lockers with logistics

The pick-up locker system works with other fulfilment operations and will have to input status data directly into TMS (transport management systems) so shipping personnel could be directed to the correct pick up locker area and the specific pick up locker.

As packages differ in size, specific information regarding the type of lockers that are available should be available in real time so packages are stored correctly.

3. How do pickup lockers communicate?

So far most pick up lockers use alphanumeric codes to help users get accustomed to picking up their packages without any hassle. But these codes pose threats in terms of security. While these codes can always be an option and can be easily sent to any device, with smartphones and smartphone apps on the rise, some other solutions may work even better.

One such option would be QR codes embedded in the retailer’s mobile application. The codes can be generated on the fly based on a secured algorithm that neither exposes the code and can also work within the application the customer already uses, thus improving loyalty.

4. What is the future of connectivity for pickup lockers?

With so many developing their own pick-up locker systems, a connectivity protocol should become the norm. With such a protocol FedEx could ship to either Amazon, Walmart or even UPS lockers for example, improving cross-retailer experience and creating economies of scale.

That being said, the development of pick-up locker systems is obviously a bit more complex than these few paragraphs but I wanted to give you a starting point and explore some of the challenges.

Are Google and Walmart going into Live Stream Shopping?

It appears that both Google, through YouTube and Walmart are approaching the idea of live stream shopping, each from a different angle.

YouTube has disclosed plans to turn its large video platform into a shopping venue. It’s already used as one of the largest how-to and influencer lead marketing platforms so it’s only natural that they would consider it.

Why does YouTube live shopping make sense?

Video is big in ecommerce and live video is going to be even bigger. With its following Shopify integration, YouTube will simplify video-lead purchases.

What are the cons?

YouTube is an advertising powered platform. Simply put – it’s pay to play. Let’s say Sephora wants to market their products through YouTube. They would use influencers or their own associates. This leads towards the question – who owns the data? Not the buyer data, which will have to end up with Sephora, so they could at least fulfil the orders but the visitor data. This sits with Youtube/Google. This might have worked 10 years ago but it’s a bit of a no-no with any rational retailer. It still is a great choice for small retailers and this makes Shopify a great choice as a partner.

Walmart buys a 7.5% stake into TikTok. Why?

Oracle and Walmart have received the “blessing” for a 20% acquisition into the hottest media discovery app / social tool TikTok. It kind of makes sense for Walmart to do it but why Walmart? Are they trying to reach an younger audience and look dope?

Nope.

They want to get into live shopping. They’ve previously missed the wagon on a few ecommerce opportunities that took them a decade to get back. Now they’ve noticed the live stream shopping trend in Chine, see the need for it in the North Americas, especially US, and want onboard.

Why it makes sense for Walmart to go into Live Shopping?

Well.. duh. They are the largest retailer in the US, see a great change happening and want on board. Appealing to younger generations is a great plus. But …

What are the cons of Walmart buying into TikTok?

Walmart, as all large companies are very hard to steer. They are a behemoth of a company that takes decades to move. Yes, when they do, they crush opposition, mostly given their logistics supply chain and distribution, which is unbeatable.

Yes, they have amazing staff with amazing ideas (which the TikTok shares purchasing is). But this is still the company that beat Amazon to the ecommerce launch only to forget about the whole ecommerce thing for 10 years, because “that’s not where our customer base is”. So … You might not get a Walmart Live soon.

What is Live Shopping and how big is it? 2021 facts and stats.

Live stream shopping makes every other retail trend in the past 30 years seem small. See what is it, how big is it and what you can expect from it.

Live Shopping is a relatively new commerce technology that uses live video streaming to connect shoppers and merchants.

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At the core it’s kinda like Zoom but less conference-like. On one hand you have a sales representative who can be either a store associate or an influencer. On the other hand you have people that want to buy what they’re selling. Or just watch a live product demo.

Think of it this way – you know how Apple announces their products each year, they invite a bunch of people in the room but also broadcast the presentation globally? Take just the broadcasting part, add shopping buttons in the stream and there you have it – live shopping.

When did live stream shopping start?

There is no clear date of when “live shopping” started but it definitely took off quickly in 2019. With the introduction of live media streaming and with a sprinkle of social media influencer marketing, people started watching their idols live, showcasing products.

The live shopping revolution started in China, where mobile penetration and mobile usage habits have made it easier for ecommerce companies to adapt to switch to live shopping. The leader in the domain is Taobao, with 60% of Chinese shoppers having watched at least one live shopping stream on the platform.

Live shopping share in China by ecommerce platform
Source: https://www.statista.com/statistics/1130366/china-most-shopped-live-commerce-platforms/

Soon enough the trend started inching into the western world with leading online retailer opening Amazon Live in February 2019. The move was amazingly timed as in just a few weeks the Covid-19 pandemic stroke. Other ecommerce players are slowly adapting to change.

However, Walmart did think make a bid for TikTok and its obvious angle is targeting younger generations through live video shopping. While a great idea, Walmart is not know for its great execution of amazing ideas.

China reaches 900 million internet users and increases online spending with live shopping

One of the key factors in adopting new technologies such as live video shopping for the Chinese Market was its shear size. The lockdowns have increased internet consumption and adoption, with leading areas being Education (almost doubling to 420 milion users in just 10 months) and Live Shopping.

A report by Qin An, head of the Beijing-based Institute of China Cyberspace Strategy, mentions that 265 million Chinese internet users buy goods via live streams starting 2020. What’s most interesting is that this figure amounts to 47% of total stream-viewing audience.

So one in two video streaming watchers are potential video shopping buyers, with this probably increasing in the future. If the same proportion holds in the US, which has 232 million online video viewers, this means there is a potential market for roughly 115 million new customers that are in need for a better experience.

Covid killed the Retail Star. Will Live Video Shopping revive it?

The Covid-19 pandemic has caused many stores to close temporarily or permanently. The trend is consistent across Europe and US. While the US retailers have been hit first and hardest, with over 14 000 stores closed and almost 2 million retailer workers being laid off, this wave of store closures will reach the EU soon. Initially store chains and SMB retail companies have been partly protected by government intervention and job supporting measures but this is unlikely to continue indefinitely.

The retail market at large has been transformed by ecommerce retailers in the past 20 years. With the recent Covid-19 pandemic, this trend has increased. Brick and mortar retailers are seeing their unit economics being displaced by challenger brands, mostly focused on online shopping and fast fulfilment. Traditional retailers are forced to carefully consider store space, employees headcount and their online operations.

First it took the brick and mortar stores

The Covid-19 pandemic has caused many stores to close temporarily or permanently. The trend is consistent across Europe and US.  While the US retailers have been hit first and hardest, with over 14 000 stores closed and almost 2 million retailer workers being laid off, this wave of store closures will reach the EU soon. Initially store chains and SMB retail companies have been partly protected by government intervention and job supporting measures but this is unlikely to continue indefinitely. 

Retail chains such as H&M are starting closing operations as they saw their operations already in the read with 50% decreases in sales.

While ecommerce stores have saw initial surges in sales due to consumers ordering online this will probably see a backlash in the future. The increase in online sales was caused primarily by existing online purchasing trends and partly by consumers’ fear of Covid-19 infections. These increases in sales have been limited to products with repeated purchase habits. 

But online retail won’t be too good for too long

Many customers are unable to experience products like they did before and this in time will surely affect online retailers. After surge in sales many of them are able to return to the slow and steady rate of increase. However, this rate has not passed 20% in Europe historically .

This means that without a way to bridge the gap between online and in-store experiences, total retail sales are likely to decrease, stores will close and many retail workers will eventually be laid off. In this scenario a paradox of increased retail demand and decreased retail offering will result in an increase in prices, inflation and job losses.

Unless…

The store of the future is live

Quick question: what makes Instagram, Snapchat and Tik-Tok a good choice for Gen-Z? Is it the social networking features? Nope, many apps have that. Is it the video and rich media? Closer but not quite there. It’s the live interaction, one on one and one to many. In some cases, such as Fortnite – it’s many to many.

And retailers are tapping into this.

We noticed that both online and in-store retailers consider live stream shopping a viable model for existing operations.

Brick and mortar retailers see live stream shopping a way for them to decrease costs with retail spaces while at the same time retaining their strengths. They see live streaming as a way to quickly and seamlessly connect digital-savvy consumers to their in-store experiences.

Online retailers see live streaming as a way for them to quickly solve problems in terms of their customers experiencing products. In the past they have experienced with experience-only stores, open-on-delivery processes and return logistics. All of these have improved conversion rates but at the same time have increased unit economics and operational costs.

So what is next? Probably – live shopping operations. Taobao has been promoting this for quite some time with high success. Amazon has jumped on board and even Google has launched ShopLoop, a video shopping app. Live shopping software will probably continue to gain traction as the retailers need a way to reach their customers in an immersive way and consumers need better experiences than two-dimensional ecommerce stores or closed stores might offer.