Walmart to up the Ante in E-Commerce Race with Amazon

By Sam Gopal | 23 Jun 2015

The world’s largest retailer is testing out a free delivery service, as well as grocery pick-up kiosks, as it looks for new ways to compete with Amazon.

To continue its efforts to boost investment in e-commerce, Walmart is testing a subscription service similar to Amazon.com’s Prime membership, and it’s fine-tuning a grocery pick-up service in a few test markets.

It’s just two ways the Californian-based company is attempting to narrow the gap with its e-commerce rival, stay ahead of a resurgent Target, and to become the same behemoth in e-commerce that it is in brick-and-mortar retailing.

Walmart, which has grown from 500 to 2,500 employees in a four year period, generated US$12.2 billion in e-commerce sales last year, a 22 percent jump over 2013. But that’s still just a small fraction of Walmart’s US$288 billion in US sales, and only about one-sixth of Amazon’s tally. Walmart intentions are to boost its efforts in e-commerce to help combat a recent stagnant growth in sales and traffic at its brick-and-mortar stores — especially with competitors investing huge dollars into their own e-commerce plans.

In this vein, Walmart has been equipping more than 80 of its US super centres to help fill online orders and speed up delivery – about the same number of distribution centres Amazon operates. The retailer now also lets shoppers pick up online non-grocery orders at any of its 4,500 US stores to meet consumers’ growing demands for convenience.

In addition, Walmart recently opened four new automated distribution centres dedicated to filling online orders, each 1.2 million square feet in size.

“We’re building best-in-class e-commerce that we then can integrate with the assets of the world’s largest retailer,” Neil Ashe, CEO of Walmart Global E-Commerce, said earlier this month in a company briefing. “We’ve built a tech company inside the world’s largest retailer.”

Other Walmart initiatives include rolling out a simplified checkout process on walmart.com in the US to improve the shopping experience on mobile devices, the source of most of retail’s e-commerce growth.

Walmart’s e-commerce grew 17 percent in the first quarter of 2015 from a year earlier — slower than in recent quarters, and below Target’s growth rates. Walmart Stores’ CEO Doug McMillon made clear at the retailer’s annual shareholder meeting this month that there is plenty more to be done by the retail giant in the online space.

To compete with Amazon’s Prime, Walmart is turning to the old-fashioned price competition on which it built its empire. Earlier this month, it began testing through an invitation-only basis, a new delivery service called Shipping Pass. The unlimited free three-day delivery service costs US$50 a year, half what Amazon charges for Prime, which currently offers free two-day shipping.

“We ultimately think that it will drive frequency, that it will drive a deeper relationship with Walmart,” Ashe told a Goldman Sachs conference last week, almost two weeks into the pilot. What customers want above all, he noted, was “predictability” and “low cost” in delivery services.

Amazon intends to aggressively protect its turf: a few weeks ago, it waived the fees for same-day delivery wherever that service is available to Prime members. Walmart tested same-day delivery two years ago in 10 markets but found the customer wanted certainty more than they wanted that level of speed.

Walmart could make some significant gains over Amazon when it comes to rivalling the AmazonFresh service. Walmart gets 56 percent of US sales from food (about US$161 billion last year), making it by far the biggest US grocer, with much more expertise in selling food than Amazon. It’s testing out a kiosk, called Walmart Pickup-Grocery, as a new way to get groceries to customers.

After a customer has placed an order online, paid and scheduled a pick-up time, they can pull up to the kiosk at the designated time, and punch in a code that tells the customer where to pull up. A Walmart worker then delivers the order to the car and prints off a receipt before sending the customer on their way.

Walmart is also testing grocery delivery with order pick-up at regular stores in four other US markets. The ability to offer both kinds of services by using assets Amazon doesn’t have– a network of stores – is what the company is betting on to differentiate it from Amazon.

“What I think sets us apart is we can get both of those right: we can get delivery to your door right, and we can the pick-up experience in our store right,” said Ashe.

More generally, the company is expanding its online range. Walmart said it will offer 10 million different SKUs online by the end of the year, compared to seven million now and 700,000 just a few years ago. While dwarfed by Amazon’s 250 million-item selection, it’s a much bigger selection than what is available in a Walmart super-centre large-format store, which typically stocks only 100,000 SKUs.

Walmart is already the number two e-commerce retailer in the US, having just surpassed Apple, and these plans are set to take the company to even bigger heights.

“One customer can shop with us in so many different ways: in stores, on their phones, at home,” McMillon told a crowd of 14,000 Walmart shareholders and workers a couple of weeks ago. “We’ll win one customer at a time.”

1 Comment

One thought on “Walmart to up the Ante in E-Commerce Race with Amazon”

  1. john says:

    Really helpful article about the walmart and amazone race! You really have a great stuff on this topic! Thanks for the valuable information…

    Shein Package Not Delivered

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