Walmart bets thousands of its stores as it seeks e-commerce market share from Amazon - CNBC

Walmart bets thousands of its stores as it seeks e-commerce market share from Amazon – CNBC

Bentonville, Arkansas – Walmart’s cavernous stores are known for their low-priced groceries, paper towels, and clothing aisles.

Now, these big boxes are hubs for their own e-commerce business, serving as launch pads for delivery drones, automated warehouses for online grocery orders and checkout locations for direct-to-refrigerator delivery. Ultimately, they will help package and ship merchandise to individuals and independent businesses that sell on Walmart’s website through a third-party marketplace.

“The store has become a shopping fulfillment hub,” said Tom Ward, chief e-commerce officer of Walmart US, in his first interview since taking the role. “And if the store acts as a fulfillment center, we can dispatch these items in the shortest distance in the fastest time.”

Walmart tends to have two main advantages to drive its e-commerce business: its nearly 4,700 stores across the United States and its dominance in the grocery business. 90% of Americans live within 10 miles of a Walmart store. The company is the largest grocery store in the United States by revenue. Walmart wants to expand its variety of merchandise, improve the customer experience and increase the density of delivery methods to turn e-commerce into a larger business.

The Covid-19 pandemic has created an opportunity for Walmart to expand its online business. The retailer’s e-commerce sales are up, helped in large part by a curbside pickup service it launched years before other retailers sought to start operating during the pandemic. $1 of the $4 Americans spent on click-and-collect orders last year went to Walmart — more than any other retailer, according to an Insider Intelligence estimate.

The global health crisis has also fueled Walmart’s sense of urgency to better compete with Amazon, the e-commerce leader. Amazon has 39.5% of the online market share in the US compared to Walmart’s 7%, according to estimates by research firm eMarketer. Last year, based on the 12-month period from June 2020 to June 2021, consumers at Amazon spent more money than the major retailer for the first time, according to company filings and estimates from financial research firm FactSet.

But the e-commerce environment has become much tougher in recent months. Gains slowed dramatically as more customers returned to stores. Even Amazon saw stagnant numbers last quarter, reporting the slowest rate of sales growth in nearly two decades.

Plus, with Walmart’s fuel and freight costs soaring and inflation surging into nearly four decades, customers are buying fewer general merchandise, like new clothes, because more of their money goes toward groceries and gas. Food sales have lower margins, which makes it difficult to profit from online sales.

Walmart’s stock sank last month, as it missed its quarterly earnings forecast and slashed its earnings forecast. It was the worst day for a Wall Street retailer since October 1987.

Even with that background, Ward said Walmart benefits from having a good reputation for value. “Price is critical to our customers,” he said. “They trust us to offer them the lowest prices. There is 60 years of experience managing that in this business.”

Rely on stores

Tom Ward, chief e-commerce officer at Walmart US, said he wants to make it easier for customers to shop however they like. To do this, Walmart is using thousands of stores to increase delivery speeds and reduce the company’s costs.

Erin Black | CNBC

Ward said his vision for the business is straightforward: to increase online sales while making it easier for customers to shop however they like.

The company’s sheer number of stores, he said, allows Walmart to outperform its competitors. For example, a retailer can locate the nearest store to a customer who is searching online for a printer. Instead of having the printer sent from a fulfillment center hundreds of miles away, a team of in-store personal shoppers can pack it up, pass it on to a delivery driver in the Walmart network, and send a notification to the customer saying the product is on the way.

“It might arrive within a few hours after you buy it online, as opposed to two days,” he said. “So it’s a transformative experience in terms of speed, which is really hard to replicate without that amazing footprint that we have.”

Walmart has 31 fulfillment centers across the United States—but more than 3,500 stores, or about 75% of its total, fulfill online orders that would otherwise be routed through the fulfillment center. Furthermore, the company said it can reach 80% of the US population with same-day delivery.

Walmart hopes that using its stores will also attract outside sellers.

Independent sellers who sign up for Walmart’s third-party marketplace can pay for the services of Walmart Fulfillment, a company that provides supply chain services from warehousing to shipping from the retailer’s warehouses. This division is led by Amazon veteran, Jer Buckley Cox.

Walmart will soon begin packing and dispatching third-party sellers’ merchandise from stores, which will make deliveries faster and more cost-effective, according to Buckley-Cox. She did not specify a timetable for this service, but said it was coming in the “near future”.

She said sellers who are gaining popularity on the company’s website have a chance to access the storage shelves, too.

Online Evolution

A package moving along a conveyor belt inside the Wal-Mart Stores Inc. fulfillment center. in Bethlehem, Pennsylvania.

Michael Nagel | Bloomberg | Getty Images

“We don’t want to show any friction,” Ward said. “We don’t want to show any plumbing.” “We want to solve all the magic behind the scenes and make it seamless so that they can buy filet mignon, a bag of apples, a T-shirt, a microwave, and they can get it done anywhere they want to.”

Another emerging part of Walmart’s plans is its drone delivery service, which Walmart will expand to 37 stores across six states by the end of the year. The company explained that this development will enable it to reach 4 million families.

On the ground, Walmart wants every delivery driver in its network to have busy roads with many stations in each neighborhood. That commitment led to the launch of GoLocal last year, which allows mom-and-pop stores and publicly traded businesses, including Home Depot, to use Walmart’s standalone drivers for online purchases.

“A driver might pull into one of our stores and receive a handful of packages for Walmart customers, and they might then go and pick up a bunch of packages for different customers or corporate customers, and then follow a very optimized route, which takes advantage of that density and lowers the cost.”

Its membership program, Walmart+, is another way the retailer is trying to make more sales online. The $98 per year service includes free shipping for online purchases and free home delivery of groceries for orders of $35 or more. On Thursday, Walmart launched Walmart + Weekend, a new sales event similar to Amazon’s Prime Day with deals available only to members.

Walmart in your home

An essential part of a retailer’s e-commerce strategy relies on a high level of customer trust.

With Walmart’s InHome service, employees enter strangers’ homes and place food directly in the refrigerator or on the kitchen table—often leaving behind a sticky note to thank customers for their business and remind them they stopped by.

Along with groceries, customers can order clothes, toys, and other items for home delivery. They can leave proceeds for Walmart employees to return to stores, too.

“People are really starting to think of their InHome Assistant as an extension of the team that helps them spend their work week or week at home,” said Whitney Bigden, vice president and general manager of InHome. “So they’re like, ‘Oh my God, you’re here, can you walk the dog? Can you take out the trash?'”

the service Expanding into major cities, including Los Angeles and Chicago, Walmart says it will be available to 30 million households by the end of the year.

Bigden said delivery employees are screened through background checks and an average of 6.5 years of experience at Walmart before getting the job. They wear uniforms, drive electric-powered brand-name trucks, enter homes with an entry keypad or smart lock and have a body camera to record the disembarkation. Usually the same two or three people who do the delivery visit the customers’ home.

Customers pay $19.95 per month or $148 annually for unlimited delivery. It is separate from the company’s Walmart+ service.

For Walmart, this is a compelling example of how online ordering can become a routine part of life, Ward said. Customers hand control over, so the company can “keep it in stock so that the grains are always there, and the milk never runs out.”

– CNBC channel Katie Skoloff And the Erin Black Contribute to this report.

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