The battle for retailing delivery supremacy has been joined.
Walmart Inc. (NYSE:WMT) said Tuesday it has begun offering free next-day delivery of online orders of $35 or more without requiring that customers pay a membership fee. The service has launched in Phoenix, Arizona and Las Vegas, Nevada, and will expand to the southern California market in the coming days, Walmart said. The service is expected to cover three-quarters of the U.S. population by year’s end, Walmart said.
The announcement is Walmart’s first concrete response to Amazon.com, Inc.’s (NASDAQ:AMZN) disclosure in late April that it would halve delivery times to one day for goods ordered by subscribers to its “Prime” service, and make the new delivery window the standard for the service. Prime members pay either a $119 annual fee or a $12.95 monthly fee. With either, they are guaranteed deliveries in two days, a clock that starts ticking typically when an order is ready to ship.
Walmart’s move into next-day delivery was expected. The company telegraphed its response in a tweet the day of the Amazon announcement, urging the public to “stay tuned” for future developments. The tweet yielded mixed public reaction at the time. Some treated it with disdain, labeling Walmart an old-school retailer left in the dust by Seattle-based Amazon and the e-tailing revolution, and desperately trying to catch up.
Initially, up to 220,000 items will be available for next-day delivery, with availability depending on where customers are located and their ordering activity, Walmart said. Fulfillment will not be handled through Walmart’s massive brick-and-mortar infrastructure, which includes 3,750 “Supercenter” stores that each hold up to 150,000 items. Instead, goods will be distributed from six e-fulfillment campuses, each of which contains multiple buildings that can run 1 million square feet or more. The locations are in southern California; Orlando, Florida; Atlanta, Georgia; Indianapolis, Indiana; Bethlehem, Pennsylvania; and Dallas, Texas. Deliveries will be made by Walmart’s existing national and regional parcel carrier network.
Wal-Mart has offered free two-day deliveries, with no membership fee and a $35 minimum order, for two years. It currently offers same-day pickups and deliveries for its online grocery business.
Unlike other big-box retailers that put most, if not all, of their inventory online, Walmart said it will be more judicious about its merchandise assortment. According to Ravi Jarawala, a company spokesman, Walmart will focus on stocking goods that its research shows are ordered most frequently and require fast delivery. The company will also take a seasonal approach to inventory management, Jarawala said. For example, suntan lotion would be available through the fall at facilities in hot-weather markets like Phoenix and Las Vegas. However, the same product is unlikely to be stocked during that time in a cold-weather market like Bethlehem, he said.
Walmart also plans to consolidate multiple orders in one shipment, allowing a driver to make one drop-off rather than multiple deliveries. The benefit of the $35 minimum order threshold is that it allows customers to consolidate their ordering and delivery needs at one time, Jarawala said. Based on customer ordering activity, $35 is an easy threshold to meet, he added.
In a letter posted on Walmart’s site, Marc Lore, president of Walmart’s U.S. e-commerce operations, said the company is “well positioned” to offer faster deliveries than next-day because 90 percent of Americans live within 10 miles of a store. Lore’s comments hinted that the Supercenters could be brought into the fulfillment mix should the company decide to compress delivery windows even further.
Marc Wulfraat, who runs MWPVL, a consultancy that tracks fulfillment and distribution trends and is one of the foremost outside experts on Amazon’s fulfillment plans, said Walmart has embarked on a multi-pronged e-commerce strategy that is a work in progress. Ultimately, Walmart will offer same-day fulfillment at the store level, either through delivery or customer pick-up. Goods stocked at a regional distribution center could be fulfilled with two-day service, or vendors can drop-ship an order to the customer, thus bypassing the retailer. Wulfraat made his comments prior to Tuesday’s news.
According to Wulfraat, Amazon’s announcement of migrating to one-day delivery was in response to what Walmart had on the drawing board.
Besides its huge physical network, Walmart has an ace-in-the-hole in Lore itself. Founder of the popular Jet.com e-tailing site, Lore joined Walmart in 2016 after it acquired Jet for $3.3 billion, and was quickly put in charge of the U.S. e-commerce operation. Aware of the perception that Walmart had become a plodding behemoth blindsided by Amazon and the e-commerce phenomenon, the Bentonville, Arkansas-based company felt it needed someone at the helm with a mindset totally geared toward the digital world.
Lore knows Amazon as well. Another company he started, Diapers.com/Quidsi was acquired by Amazon in 2011 for $550 million.
