Walmart Announces Same-Day Delivery, Tries to Beat Amazon at Its Own Game

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Walmart is the king of all retail, with revenues that are six times greater than its nearest competitor. Amazon has a comparable stranglehold on the e-commerce industry. And while it may have once seemed that each of these mega-merchants were lords of their own separate castles, it is becoming increasingly clear — as e-commerce sales continue to grow its share of total retail sales — that these two behemoths will battle it out to determine the future of the retail industry.

Amazon knows that e-commerce sales won’t just inexorably rise forever. Traditional retailing has advantages,  like the ability to offer customers the chance to see and touch a product before buying. Another key strength of traditional retail is instant gratification. A customer can go out and get a product right now at his nearest retailer if he so chooses. But recently, Amazon has been trying to neutralize that advantage by offering same-day delivery for some products in a limited number of areas. And while expanding that service to more places and products may be a ways off, it is clear that Amazon is intent on cutting down traditional retail’s “instant gratification” advantage as much as is economically possible.

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Walmart isn’t taking it lying down. The big-box giant announced this week that it too would be offering same-day delivery, using its extensive network of superstores as distribution centers, and shipping products to consumers via UPS.  According to a report in The Wall Street Journal, the service will initially be available in the Northern Virginia, Philadelphia, Minneapolis, San Jose, and San Francisco areas. The service will cost $10 per delivery, with no minimum order. Amazon’s own same-day delivery service costs $8.99, with a $0.99 per-item shipping charge.

How big of a deal is same-day delivery? The jury is still out. As evidenced by the high shipping costs, this is not a cheap thing to do. With a ten-dollar-per-order shipping charge, it’s unlikely that many customers will regularly take advantage of the service, unless they are really in a bind, need a product immediately and don’t have time to go to the store themselves to pick it up. Of course, as with any service, the more demand for it there is, the more cheaply a retailer can provide it.

(MORE: Will Amazon Take Over the World?)

More importantly, however, the move is a signal of Walmart’s desire to make a big play for ecommerce business. It comes on the heels of the big-box retailer’s decision to stop selling Amazon’s Kindle e-readers and tablets, as these devices have become a main facilitator for consumers to purchase products through Amazon.com. In a presentation to investors yesterday, Walmart made its global ecommerce efforts a central theme of its pitch.

According to the trade publication, Internet Retailer, Walmart’s ecommerce sales were $4.9 billion, which is roughly 1% of its total revenue, and well shy of Amazon’s online sales of $48 billion. But Walmart is known for its ability to adapt to the times and to continue to grow revenue after many other mature companies would have rested on their laurels and enjoyed the fruits of being an established player. And while ecommerce sales are just a sliver of the firm’s overall revenues, the distinction between online and offline shopping is becoming more and more blurred. For instance, Walmart has claimed that half of its online sales come in the form of in-store pickups, where customers purchase the item online and then travel to the store to get it.

With the retail landscape changing so rapidly, it makes sense for the firm to engage in low-risk experiments like same day delivery. Ultimately, it may not be economically feasible, as customers may prefer to swing by a nearby store instead of paying huge shipping fees. But it doesn’t hurt to give customers that option. By showing a willingness to experiment and change, Walmart gives itself more than a fighting chance to dominate the future of retail, just as it has the past.

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7 comments
Garry M Burkhalter
Garry M Burkhalter

Walmart is bad business for smaller communities. It shuts mom and pop businesses, then employs those who displaced, which are in turn underpaid to the point that they become new welfare recipients. Towns (smaller communities) have gone completely bankrupt because of Walmarts business model. Here's my source http://www.huffingtonpost.com/...

neovalkyrie
neovalkyrie

Shopping at Walmart isn't a great experience. The ones I've been to have always had poor selection, opened items, lousy customer service and the stores always looked disorganized and unclean. At least with Amazon you don't have to deal with all that. All the info/reviews are on the website and waiting for 2-day shipping is a non-issue for me. The only positive note about Walmart is their free shipping to store option but I've always hated going to the store so I avoid it. Is there such a thing as a nice Walmart store? I don't know but I rather shop at Target. 

DemonRoach
DemonRoach

Yes, let's have walmart take over the world.

lancedal
lancedal

What Amazon has that Walmart doesn't have: selection. If I can buy the same product at Walmart at the same price, I would. But more often than not, I can find better product on Amazon at about the same price.

Gary McCray
Gary McCray

See and Touch are not nearly important as they used to be.

Online they are replaced with lots of pictures, detailed specifications and customer reviews.

Over all the online experience is probably more reliable than seeing the product in person and talking to a salesman who's only immediate goal in life is to sell you whatever product he has on hand.

Consumer computer use is rising steadily and as long as shipping can economically keep up, more and more consumer commerce is going to be done online.

The only products that this will not be true for are those that do not readily lend themselves to online sales, but even for such clear examples as grocery and hardware stores, online sales are cutting into many of their more profitable sales as well.

Disquskurr
Disquskurr

Good to see Walmart waking up.

The best thing to do is sell what Amazon sells too !!

That will be cool for the public at large.