Walmart U.S. eCommerce CEO Marc Lore promised last month changes in its online service. The first change appears to be a money saver for customers and a move in a series of efforts to compete with Amazon and other online retailers.
Akin to Jet.com’s program that gives online customers choices to lower their costs, Walmart.com will do the same when online shoppers opt to pickup their items in Walmart U.S. stores versus the two-day free delivery at home. Dubbed by Lore as the “pickup discount” a customer ordering a $148 child safety seat online could save $7.40 with the in-store pickup option. Lore said the option will be available April 19 on items sold online and not found in stores.
He said the pickup discount will be offered on 10,000 items initially, but the retailer hopes to make it available on the more than 1 million popular items by the end of June. Lore made the announcement on Walmart’s corporate blog Wednesday (April 12).
“One of the things I love most about Walmart’s heritage is the maniacal focus on our customers and finding ways to offer them low prices – every day. We do this by creating efficiencies in our business so we can share the savings with them. And, in the online world, we can use our physical stores and supply chain to do some pretty unique things for our digital customers,” Lore said.
Last month at the ShopTalk Conference in Las Vegas Lore said the retailer would announce something in April that should help create more price transparency while also empowering customers to shop smarter. Lore said the recent two-day free shipping for online orders of $35 was basically “table stakes” in the ecommerce world. He said for Walmart to accomplish that the retailer had to build out its online fulfillment center network which includes six centers, compared one in 2015. But even with the $2 billion spent on increasing fulfillment capabilities, final mile delivery remains the most expensive part of the supply chain.
“We can remove the last mile delivery costs (that represent the lion’s share of the costs to ship products to customers’ homes) when we leverage our fleet of more than 6,700 trucks to deliver products directly from fulfillment centers to our 4,700 stores. This means, quite simply, it costs less for us to ship to stores. So, our customers should share in those savings,” Lore said.
Lore also said recently if a customer wants home delivery in two days and meets the $35 order threshold, they get it without a buying a subscription like the $99 annually charged to Prime members of Amazon. Critics argue that Amazon memberships also include media downloads of books, music and television programming – benefits Walmart does not offer.
The pickup discount is applied at checkout when the shopper checks pickup in store on the eligible items. Lore said if the customer finds home delivery easier then they can forego the discount and have it delivered for free in two-days. Lore said last month that online orders at Walmart.com went up as soon as it launched free two-day home delivery. He also said Walmart.com aims to win in ecommerce and will not stop short of that goal.
Retail analysts had mixed sentiment on this move by Walmart.com.
“As with many competitive moves that those of us in the industry follow closely, the challenge for Walmart will be getting the word out to customers, with ‘customers’ being the key word. The relatively small savings are unlikely to convert shoppers who favor Amazon and don’t regularly shop at Walmart. However, the move could incentivize those who frequent Walmart stores to add a pick-up stop to their next Walmart run. If the goal is to achieve greater efficiencies for Walmart, this could move the needle. Market share grab? Not so much,” said Carol Spieckerman, CEO of Spieckerman Retail.
But 73% of retail insiders polled by RetailWire about pickup discounts said Walmart will be “somewhat effective” in helping the retailer shift online purchasing from home delivery to store pickup. Just 9% see the move as “very effective” and 18% said the move is likely to be “somewhat effective.”
Patricia Vekich Waldron, global marketing director for IBM retail and consumer products, said retailers have been trying to turn stores into experience centers and point of fulfillment.
“This is a step in the right direction by Walmart.com. However, we should all expect Amazon to roll out stores once they find the right model,” she added.
Charles Dimov, director of marketing at OrderDynamics, said it’s a “brilliant idea as long as Walmart.com uses the discounting tactic sparingly.” He said reports indicate between 30% and 50% of shoppers have tried click and collect, so it’s still not the norm. Dimov said it’s to Walmart’s advantage to have a shopper pick up in store and perhaps buy other things in the process. He warned there is also a downside in discounting, because it can become addictive and once consumers are hooked they demand more of it.
Several experts don’t think it’s a “slam dunk” by Walmart U.S. but say they understand why the retailer is doing it.
“In the short run it might work for Walmart, but I think it’s risky in the longer run,” said Annibal Sodero, assistant professor of supply chain at the University of Arkansas.
He said there are costs associated with consumers driving to a store to collect an online order, having to park and perhaps wait for the order to be brought out. He said having the consumer pickup in store is more about the retailer’s convenience than the shopper’s in some cases.
“When you go to the store and purchase an item, how many times do you consider the logistics cost of the item when looking at the price. Probably never. The price is the price and consumers don’t know how much the retailer spent to get it to the shelf,” Sodero said. “But in omni-channel price seldom includes shipping without some additional costs.”
Sodero said there is a risk for online retailers to try and undercut Walmart’s discount and promise to include shipping to the home. He said online pricing in retail is cut-throat and often consumers don’t find out the true cost until they get ready to check out and see the shipping costs. But with Uber Delivery and other new forms of logistics services coming at a lower cost, Sodero said nimble online retailers will be able to match or better Walmart’s discounted price and not require the shopper to use their time and car to pick up in a store. He said Walmart has to try many things in the ever-changing space in which it operates, but he will not be surprised if this initiative is pulled or changed as online competitors play hardball with prices.
Steve Montgomery, president of B2B Solutions, said the 3% to 5% cost savings won’t likely be enough to shift Amazon customers to Walmart.com. He said it will depend on how easy it is for shoppers to use the in-store pickup process. If it’s a hassle, consumers won’t find the discount worth it.
Walmart said it continues to try and enhance the pickup experience with lanes dedicated for pickup in many of its stores as well as check-in stations at the fronts of stores. The retailer is also testing a large locker at Walmart Store No. 1 in Rogers, but these are just tests and not in mainstream use. A large percentage of Walmart U.S. stores across the country require customers to walk to the back of the cavernous supercenter and wait for someone to retrieve their order. Analysts say much of the program’s success will likely hinge on how well the retailer is able to execute on in-store pickup because consumers have to find the experience worthwhile to use it again.