Wal-Mart Stores will build its next two e-commerce fulfillment centers in south-central Florida as part of its continued focus and investment to drive more online sales while also expediting delivery at its lowest possible cost.
The two next-generation e-commerce fulfillment centers round out the retailer’s plans to expedite faster delivery capabilities to nearly 90% of U.S. consumers— a metric that competitor Amazon has already claimed with two-hour delivery to its Prime members in New York City.
In the past year, Wal-Mart opened similar locations in Fort Worth, Texas, Bethlehem, Penn., and Plainfield, Ind. A center in Atlanta is set to open in the coming months.
“These centers are part of our next-generation fulfillment network that also consists of existing, smaller e-commerce facilities, store distribution centers, more than 80 ship from store locations, 4,500 Walmart stores that serve as pickup locations, and our transportation fleet. All of these work together to ship orders fast and at a lower cost,” Ravi Jariwala, corporate spokesman for Walmart.com, said Thursday (Sept. 17).
He explained that in years past a customer ordering shampoo, apparel and a toy in one online order could have received three shipments which meant Walmart.com had to package and ship three separate boxes likely all coming from different locations. With Walmart.com’s expanded fulfillment network, Jariwala said that customer would likely get all three products in the same shipment because more e-commerce merchandise is now housed under the same roof.
“This is a better experience for the customer and less expense for the company. That is at the core of what Walmart.com is aiming for with its fulfillment investments,” he told The City Wire.
The planned Florida facilities will each add more than 1 million square-feet of storage capacity for goods sold on Walmart.com. Together the two centers will employ 625 workers. One center will stock smaller products such as computers, apparel and toys. The other site will house oversized items such as large electronics, select home products and exercise equipment. These two centers are slated to open late next year.
Wal-Mart’s commitment to growing e-commerce sales has come from the top down and backed by a $256 million investment in fiscal 2015 and between an estimated $193 million and $288 million again this year. Those figures are based on the 8-cent earnings ding last year, and between an incremental 6- to 9-cent earnings per share offset in fiscal 2016 which ends Feb. 1, 2016.
Retail experts largely support Wal-Mart’s investment in e-commerce.
“Until Walmart is able to support fast delivery, it will forever be competing solely on price, and even that advantage won’t be guaranteed. Being cents lower on items that Amazon carries won’t be enough to mitigate longer shipping windows, and wooing Amazon Prime members will require that Walmart offer an even more significant price benefit,” said Carol Spieckerman, CEO of newmarketbuilders.
She said the good news for Wal-Mart is that’s ahead of competitors when it comes to retooling its supply chain for multi-touchpoint fulfillment.
“I imagine that everything is on the table at this point in terms of partnership, third party support and creative funding models. Walmart is determined to win and that doesn’t have to equate to it doing all the heavy lifting,” Spieckerman said.
Jason Long, CEO of Shift Marketing Group in St. Louis, also agreed that Wal-Mart’s supply chain investment is a move in the right direction.
“The costs are prohibitive now but Walmart can’t fall further behind Amazon in regards to shipping time. It’s fair for Walmart to ask suppliers to shoulder some of the costs. Of course some of these costs will eventually pass through from the supplier to Walmart,” Long told The City Wire.
“Brick & mortar used to have lead time as a competitive advantage – if you wanted something in the next day or two the consumer knew they had to walk into a store to get it. That is not the case now in many markets where same day, and now one to two-hour ship is the new benchmark. Walmart has to keep their foot on the pedal regarding quick ship or they’ll see more of their business erode over time,” Long added.
Neil Ashe, CEO of Walmart Global e-Commerce, has said Wal-Mart can win in ecommerce by leveraging all of its assets that allow it to ship orders quickly and cost-effectively to customers.
“We must give our customers choices for how they want their orders delivered – pick them up in a store as quickly as the same day, or we can ship to their door,” said Ashe.
In June, Ashe told the media that this next generation fulfillment network combines new large-scale fulfillment centers with Wal-Mart’s expansive transportation network.
“Our data scientists have built algorithms that dictate the assortment that needs to be placed in our different nodes, and to dictate from which node we ship an order,” Ashe added.
Ashe said as more of the next-generation fulfillment centers come online, efficiencies improve. When fully operational, the centers – along with other nodes – will position Wal-Mart to serve the vast majority of the U.S. population fast and at a low cost.
Growing sales is also at the core of the retailer’s goals. In fiscal 2015 Wal-Mart’s e-commerce sales grew approximately 22% to more than $12 billion. Those sales benefited by a 25% increase in gross merchandise value for the year.
Wal-Mart Stores CEO Doug McMillon said in February that fiscal year 2015 was solid, but not quite as strong as he wanted.
“We’re striving to balance sales growth and profitability. We’re being thoughtful with our investments, ensuring we have the infrastructure in place to build this business for the long term. I’m excited about the possibilities that are in front of us,” McMillon said.