DC Velocity - June 2016

newsworthy

HAS WAL-MART FINALLY CLOSED THE E-FULFILL-ment barn door, though long after Jeff Bezos and Co. have scampered down the road? The answer may not only determine which U.S. retailer gains the upper hand in the years ahead, but also shape the future for what has been the most successful retailer in history.

Wal-Mart Stores Inc.’s decision to pilot an unlimited and guaranteed two-day delivery service for online orders to counter Bezos’ Seattle-based Amazon.com Inc.’s successful two-day delivery offering, called “Prime,” is the Bentonville, Ark.-based giant’s most ambitious step yet to cut into its rival’s lead in online sales, growth, and mind share. Wal-Mart had offered a three-day guarantee for online deliveries.

Wal-Mart is rolling out the heavy artillery: about 6,000 tractor-trailers that constitute one of the country’s largest private fleets as well as a cluster of regional carriers; 4,573 U.S. stores that could be used as potential fulfillment locations; and eight distribution centers dedicated to the service. For good measure, it will charge a $49 annual subscription fee for the service, $50 less than Amazon charges for Prime.

The launch, which Wal-Mart has not commented on publicly on its website or in response to media requests for additional information, comes at a key point in what is likely to resemble a high-stakes e-tailing cage match. Amazon is coming off a rock-solid first quarter, where it actually made money from businesses other than selling Internet cloud capacity. Sales rose 28 percent year over year. Amazon has also begun to control its own two-day delivery network by leasing 40 Boeing 767-300 air freighters from cargo carriers Air Transport Services Group Inc. and Atlas Air Worldwide Holdings Inc.

Wal-Mart, by contrast, reported a modest 7.5-percent
gain in global e-commerce volume in its fiscal 2017 fourth
quarter, which ended April 30. That followed an 8-percent
gain in its fiscal 2017 first-quarter results, which included
the holiday period. The company, which reported $482
billion in revenue in its 2016 fiscal year, does not break
out online sales in dollar terms. However, consultancy
Shipware LLC estimates that, as of last October, online sales
accounted for just 2. 5 percent of Wal-Mart’s total sales.

BALANCING ACT

Wal-Mart, already years behind Amazon in e-tailing suc-
cess and prowess, must emulate Amazon’s philosophy
of providing a “buy anywhere and anytime” experience
to consumers and businesses,
but do it in a way that leverag-
es Wal-Mart’s unique assets—
namely, its large store network,
said Satish Jindel, who runs the
SJ Consulting Group Inc. trans-
port and logistics consultancy.
Jindel said the company
should designate one or two
stores in each market as that
market’s fulfillment locations.
Ironically, fellow retailer Sears
Holdings Corp., which lost
much of its retail marketing dominance at the hands of
Wal-Mart, has adopted such an approach to meet omni-
channel demand. He said he was doubtful that Wal-Mart
could consistently hit two-day delivery targets by fulfilling
from the eight DCs alone and not bringing the store net-
work into play.

What Wal-Mart must avoid is copying Amazon’s execution because the two companies come at retailing from totally different backgrounds, and because no one is more efficient than Amazon at executing its model, Jindel added. “Wal-Mart can’t run its e-commerce business by the rules written by Amazon,” Jindel said.