As we head into the holiday shopping season, giant retailers Walmart and Amazon are going head to head over same day delivery. We wanted to get the deal from Zintro experts regarding the benefits to Walmart and if this move sets up other potential competitive retail avenues for the two companies.
Will Hu, a retail and markeing executive, says that Walmart’s recent foray into same day shipping for its ecommerce site is another sign that the giant retailer is proactively addressing the challenges posed by online retailers, and that it has ambitions to dominate the ecommerce arena as it does the brick-and-mortar channel. “Instead of belatedly reacting to the trend of consumers shopping and price-comparing online, Walmart and a few other mass chain retailers have made changes to their internal organizations and are addressing the eTailer challenges head on,” Hu explains. “Amazon offers same day delivery to address one of the key weaknesses of ecommerce: the inability to offer instant-gratification to consumers. By offering the same service, Walmart shows that it will not concede any potential online customers who value this service.”
Hu explains that Walmart’s same day shipping will cost $10 per delivery, and Amazon’s costs $8.99 with a $0.99 per-item shipping charge. “Despite the potential to attract more shoppers seeking instant-gratification or last-minute gifting during Q4, the same day shipping is unlikely to have a drastic impact to Walmart’s online business (about $5 billion per year or about 1 percent of its total annual revenue). What the service does, however, is to clearly demonstrate that Walmart will not idly concede the leading eTailer position to Amazon, and is another component of its overall push to establish a credible ecommerce presence,” Hu says. “Other recent salvos from Walmart in this quickly escalating contest include Walmart dropping the Amazon Kindle line of products (the hardware devices are a major source of traffic for Amazon) and its latest investor presentation featuring global ecommerce as a central theme. Walmart has the potential to become a major ecommerce presence and challenge Amazon’s dominance in that arena. Walmart’s 4000 plus locations nation-wide can serve as potential distribution centers for fast fulfillment, and it enjoys vast scale and strong supplier relationships. Amazon on the other hand, has a clear lead in the ecommerce arena and is increasingly locking-in shoppers with its hardware and digital content driven eco-systems, while continuously innovating new products and services. Regardless of this contest’s outcome however, the consumers can look forward to more innovation, better services and lower costs.”
Kevin Strawbridge, an expert in omni-channel commerce, comments that Walmart is bigger than Amazon as a company and likely more pervasive in the everyday lives of more customers. “By adding a same day delivery option, Walmart is able to extend its brand, extend its ability to provide personalized assistance, and compete head to head with Amazon on pricing AND convenience,” he says. “Walmart recently stated that it plans to grow online business to over $9B in the coming years. As this channel grows, Walmart’s offline business will continue to grow as well. All combined, it is a smart use of a very broad distribution system that Walmart already has in place, and it will likely be immediately accretive to Walmart shareholder value.”
Michael Comstock, an expert in logistics, says that Walmart’s move into same day delivery of online purchases is seen as a competitive move to a similar initiative launched by Amazon. “On one hand, Walmart has far more store locations from which to source orders. On the other hand, Amazon’s distributed fulfillment centers are far more efficient for order processing. Amazon is using centrally located parcel lockers to deliver orders that consumers can pick up at their convenience. This trend is yet another development in the evolving consumer ecommerce landscape,” says Comstock. “With the advent of sales tax being charged on all online purchases, the advantage of pure play ecommerce stores has evaporated. Many brick and mortar sellers have introduced ‘buy online, pick up in store’ service. Using retail locations as fulfillment sources for online purchases enables the next step of same day delivery.”
Comstock says that Amazon has a huge hurdle in that it has to build the physical presence that Walmart, BestBuy, Target and others retailers already have. “And we also cannot forget the hundreds of thousands of small retailers who now can get into the online ecommerce game with same day delivery,” he points out. “Web stores are easy to put up, and with some sound digital marketing, even the little guys can now compete. This trend will give rise to a re-invention of the messenger industry. Using UPS for delivery as Walmart intends would seem to make sense, except early cut offs and costs could pose difficulties. Watch for the rise of technology enabled, on demand messengers to step into this space.”
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