Lowe's to Add Pickup Lockers, Boost Contactless Deliveries

Zacks Equity Research
·4-min read

The coronavirus pandemic has made hygiene and social distancing practices imperative, a trend that has further boosted online shopping habits. Markedly, contactless delivery services are receiving importance, reaching a whole new high amid the pandemic.

Retailers such as Lowe’s Companies, Inc. LOW are undertaking efforts to make their contactless services accessible and stay ahead in this digital upsurge game. This popular home improvement company announced plans to add Buy Online Pickup in Store self-service lockers across all U.S. stores by the end of March 2021.  Let’s dig deeper.

Lockers to Better Cater Contactless Deliveries

Lowe’s self-service pickup lockers will be installed at more than 1,700 stores and will enable customers to collect their same-day orders safely and at their own convenience. This digital experience relies on electronic technology embedded in the lockers that generate a scannable barcode as soon as an order is ready for pickup. Once an associate stages an online order, the customer receives an automated email notification that contains a one-time user barcode. The customer can scan the barcode at the lockers using their smartphone and thereby complete the transaction. The system will eliminate checkout time and allow fast movement in and out of the store during the busy holiday season.

The company expects to install these innovative lockers in most metro cities by Thanksgiving. In fact, customers can now collect their online orders from the self-service lockers from store locations including Charlotte, Philadelphia and the tri-state area of New York, New Jersey and Connecticut. For providing the retail locker solution, Lowe’s is working with Parcel Pending by Quadient. Notably, Parcel Pending is a leading package solutions provider in the United States.

Digital Investments are a Prudent Move

According to a study conducted by McKinsey & Company, as many as 60% of U.S. consumers stated that they are currently using Buy Online Pickup In Store services and will continue using it when the pandemic subsides. Hence, the popularity and widespread usage of contactless retail services are likely to continue in the forthcoming periods.

Well, Lowe’s has been investing toward boosting its omni-channel operations for a while now. When shopping preferences began witnessing a major shift with the onset of the pandemic, Lowe's accelerated its efforts to expand digital offerings. In this context, the migration of Lowes.com to the cloud as well as the roll out curbside pickup aided sustaining online growth.

We note that the company has been building upon its in-store technology and delivery network over the past 18 months to support elevated DIY and Pro customer demand. Markedly, sales at Lowes.com increased 135% in second-quarter fiscal 2020, as the company’s pro and DIY customers increasingly shopped online. This drove online penetration to 8% of sales.

Moreover, the company is focusing on accelerating front-end work and drive customer-facing capabilities. These capabilities include online-delivery scheduling and order tracking, a customized homepage, simplified search and navigation as well as enhanced online product offering to boost customer experience.

With demand for contactless services here to stay, Lowe’s latest investment in self-service lockers is another feather in its cap. Management highlights that more than 60% of the company’s online orders are picked up in stores. Hence, broadening pickup options are a worthwhile strategy for the company for creating a frictionless shopping experience for time-pressed customers.

Apart from Lowe’s, companies like Walmart WMT and Target TGT are also boosting their pickup-in-store services. In fact, large physical store networks of these retailers enable to fulfill functions such as buy online pick in store, same-day delivery and curbside pickups. This puts them in a favorable position to compete with e-commerce giant Amazon AMZN.

All said, we expect that Lowe’s efforts to boost omni-channel presence alongside its strong retail fundamentals will continue to bear fruits. This Zacks Rank #3 company’s shares have surged nearly 22.4% in the past three months compared with the industry’s rise of 13.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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