Walmart Inc. wants to one-up Amazon.com Inc. in the fight for online shoppers.
The world’s largest retailer is rolling out a next-day delivery service to counter Amazon’s recent move to speed shipment times for members of its Amazon Prime loyalty program to just one day from two.
Starting Tuesday, Walmart.com customers in Phoenix and Las Vegas who buy at least $35 worth of goods will get free one-day shipping. The offer, which Walmart (No. 3 in the Internet Retailer 2019 Top 1000) had hinted was in the works and says will be applied to as many as 220,000 items, will extend to Southern California in the coming days and will reach about 75% of the U.S. by the end of the year.
Unlike Amazon (No. 1), which will spend $800 million this quarter to reduce delivery times, Walmart said its shift would actually cost the company less because the items will typically come in just one box from a single warehouse that’s closest to the customer. Keeping a tight lid on expenses is paramount for Walmart, whose domestic ecommerce business isn’t profitable. The ecommerce operation is forecast to lose more this year than it did in 2018, according to Bloomberg News.
“Anytime someone shops next day, it is guaranteed to cost us a lot less to ship,” Marc Lore, Walmart’s U.S. ecommerce chief, said in an interview with Bloomberg. “We are not paying the carriers anymore. That’s in contrast to online orders that come in multiple boxes from multiple locations, which can be quite costly.”
Lore declined to say whether the expected savings could help the online business get out of the red faster.
“Walmart’s announcement that it is launching a free next-day delivery option is the latest salvo in the ongoing delivery arms race initiated and recently escalated by Amazon,” says Charlie O’Shea, lead retail analyst at Moody’s Investors Service, which provides credit ratings, research, and risk analysis.
“In its ongoing battle with Amazon for market share, Walmart is continuing to leverage a critical asset, its over 5,300 U.S. store locations, which we continue to believe is a meaningful advantage, especially when it comes to offering the consumer purchase delivery options. In addition to providing consumers with same-day availability via in-store pickup of online orders, these stores augment a world-class proprietary distribution network as they are also potential shipping points,” O’Shea says.
Walmart says 90% of Americans live within 10 miles of a Walmart store.
Brian Olsavsky, Amazon’s chief financial officer, announced the retailer’s one-day shipping plan last month during a conference call with analysts. About 100 million items are available for Prime delivery, according to Amazon’s website.
Walmart’s available next-day shipping items
The next-day shipping applies to a broad range of merchandise—up to twice the number of items found in a typical Walmart supercenter—and includes such items as Bounty paper towels, Gentle Giants dog food and store-branded diapers. Unlike Amazon’s one-day delivery, which is available for its Prime customers who pay an annual fee of $119, Walmart’s service will be available for most shoppers without a membership fee.
“The Walmart offer is affordable for consumers and Walmart alike,” Brandon Fletcher, an analyst at Sanford Bernstein, said in a note Tuesday. “This will just affirm Walmart’s survival for investors.”
Walmart’s goal of reaching three-quarters of the U.S. would put it on par with Amazon, which can deliver at least next-day service to 72% of the U.S. population, according to a March note from RBC Capital Markets.
Walmart’s main website will feature a button that lets shoppers enter a separate page displaying the items eligible for the service. Everything in the cart must be eligible for next-day delivery to qualify. Lore estimates that about half of all online orders will automatically qualify for next-day delivery, as the items eligible are those most commonly purchased.
The offer doesn’t apply to fresh and frozen food, which is operated separately and offers same-day home delivery for a fee.
For the past year, Amazon has offered to help entrepreneurs finance startup delivery businesses to expand its own logistics capacity, and this week the internet giant said it would extend the offer to its employees as well. Walmart, meanwhile, has experimented with having its staffers make deliveries on their way home from their shifts.
Sucharita Kodali, an analyst at Forrester Research, said the success of Walmart’s next-day project would hinge on the selection Walmart offers.
“The question is, how many people will want those items?” Kodali says. “Is it a compelling enough assortment? If it is, that becomes attractive for shoppers, especially higher-income shoppers who don’t normally shop at Walmart.”
Walmart’s next-day delivery offer is part of an ongoing battle for customer loyalty that includes Walmart, Amazon and Target Corp. (No. 16), says Charles Dimov, vice president of marketing for inventory management vendor OrderDynamics.
“Between Amazon, Walmart and Target all pushing for convenience and speed, the competition is quickly heating up,” Dimov says. “With three of the biggest retailer players offering free, one-day shipping, membership required or not, customer expectations and the new industry norm have been set. But the good news is, with the right order management technology in place, it’s not too late for other retailers to get on board with one-day delivery and meet today’s omnichannel shoppers’ free shipping expectations.”
Members of Target’s rewards program, called Target Circle, receive a 50% discount on a first-year membership for same-day delivery with Shipt, as well as free next-day delivery via the Target Restock service. Target announced yesterday it would expand its free Drive Up service—which offers curbside pickup of online orders—to more stores nationwide.
Pet supplies online
In another move intended to capture more online customers, Walmart last week launched WalmartPetRx.com, where consumers can purchase prescription pet medications for dogs, cats, horses and livestock. Through that website, Walmart offers free two-day shipping on orders over $35.
Walmart says it also will open nine new in-store veterinary clinics in the Dallas-Fort Worth area in late May and June and plans to open a total of 100 nationwide over the next 12 months. In addition, Walmart says it added more than 100 new pet brands to its online assortment over the last year.