Walmart Battles Amazon With the One Thing the E-Commerce Giant Lacks

Walmart has launched another initiative to compete against Amazon, this time leveraging the one thing the retailer has that the e-commerce giant doesn't--a breadth of physical stores. Walmart will now offer discounts for picking up online orders in its stores, starting on April 19. Pickup Discount will initially be available on about 10,000, online-only items that customers buy online and ship to any Walmart store for pick up. The retailer plans to roll out the discount to more than one million of the most popular items by the end of June.

"We’re creating price transparency to empower customers to shop smarter and choose what’s best for them," said Marc Lore, President and CEO, Walmart U.S. in a blog post. 

Lore explained it can remove the last mile delivery costs when the company leverages its fleet of trucks to deliver products directly from fulfillment centers to its 4,700 stores.

"This means, quite simply, it costs less for us to ship to stores. So, our customers should share in those savings," he wrote.

"Last-mile delivery makes up 28% of the costs of delivery alone," explained Sarah Engel, CMO, DynamicAction. "Walmart knows this all too well and is turning to BOPIS to reduce this costly expense with their new Pickup Discount program. Not only are they reducing the hit to their profits by minimizing their delivery costs, but Walmart is further setting themselves apart from Amazon by connecting their purchase data across all channels and utilizing their physical stores to their advantage as local distribution centers ­– something Amazon is not in a position to do. Furthermore, they are driving the online shopper into the physical store, where they are well positioned to drive incremental sales."

Customers shop an item notated with "Pickup Discount" on Walmart.com and ship to their local store for pick up. These shoppers will then receive a discount based on each individual item. In one example, a Britax B-SAFE 35 Infant Car Seat offers a Pickup Discount of $7.40, while an even larger item like a TV (the VIZIO SmartCast M-Series 70" Class 4K Ultra HDTV) offers a Pickup Discount of $50.

According to the retailer, 90% of Americans live within 10 miles of a Walmart store, which means pickup may not be a hardship for most. The company has also been aggressively expanding its Online Grocery Pickup service, which is in 600 stores currently with an additional 500 locations planned for this year.  The service allows shoppers to order groceries online, select a pickup time and have those groceries delivered to their car.

“By offering a discount for customers to pickup select items in store, Walmart is definitely on to something," said Nick McLean, CEO, OrderDynamics. "While buy online, ship to store is on the rise, it is still not the norm and this is great way to convert hesitant shoppers. However, it will only work to Walmart’s advantage if they use the discount sparingly. The discount should be an incentive to get shoppers in the door and drive additional sales. By over discounting or offering the promotion on too many items, Walmart may end up losing profit margins on both online and in-store purchases.”

Walmart noted it has added additional staffing at Pickup desks, including department managers in many stores. It has also developed new training programs and introduced mobile workforce technology. 

Some Walmarts are offering a Pickup Tower. "Much like a high-tech vending machine for your online orders, this feature in a few of our stores allows you to pick up items in less than a minute by scanning a bar code sent to your smartphone," explained Mark Ibbotson, EVP of Central Operations – Walmart U.S.

The pilot phase has been so successful Walmart plans to expanding it to other locations across the country. The company is also testing "other pickup options and locations."

"Retailers know that an omnichannel consumer is more valuable than a single-channel consumer," said Ed Kennedy, director of commerce at Episerver. "Omnichannel consumers spend more online and spend more when they go into physical stores to buy after shopping online. Walmart is the first to pass this value along to the customer explicitly. But it comes as no surprise as Jet.com's CEO Marc Lore takes over the helm of all Walmart’s e-commerce operations. It’s similar to an incentive that Jet.com pioneered previously, where consumers receive discounts on their total when they add qualifying items to their cart. Walmart is simply extending that value relationship across channels now."