Walmart tests matching Prime delivery speed
In an effort to provide a better answer to Amazon Prime, Walmart’s ShippingPass subscription service will offer delivery in less than two days rather than three.
The price of the program, still in pilot after being introduced with a three-day promise last year, is also being reduced by $1 to $49 a year. Not yet available widely, ShippingPass lets Walmart.com customers get free delivery on more than one million of the most popular products on the site. Standard delivery from Walmart.com runs 4 – 6 days and is free on orders of $50 or more.
Prime likewise offers delivery in less than two days for $99 annually, but also includes perks such as free music, books, TV shows and movies.
While the lack of entertainment features helps bring ShippingPass’s cost down for consumers, Walmart said the decision to shorten its free delivery promise stemmed from synergies found across its infrastructure.
“We can offer faster and more affordable shipping because we have a unique fulfillment network that includes new large scale fulfillment centers, stores, distribution centers and our transportation network,” Walmart said in the statement.
The Wall Street Journal said Walmart is “building a regional delivery network” by shifting more inventory to its eight massive e-commerce warehouses that work with its more than 150 distribution centers. Similar to Amazon, Walmart plans to use more cost-efficient regional delivery services instead of national carriers. Finally, Walmart is looking to maximize the use of its 6,000 tractor-trailers, one of the largest private trucking fleets in the country, along with its 4,600 U.S. store locations, to support online delivery.
While other stores are partnering with ShopRunner or developing their own programs to support free-shipping demands, the Journal implied Walmart looks best positioned to take on Amazon’s logistic capabilities.
“They know transportation better than people realize,” Ivan Hofmann, a former FedEx executive and transportation consultant, told the Journal. “It’s a core strength of Walmart.
- ShippingPass – Walmart
- Wal-Mart Takes Aim at Amazon – The Wall Street Journal
- Wal-Mart takes aim at Amazon and makes Shipping Pass a two-day service – Bloomberg/Internet Retailer
- Walmart begins testing 2-day shipping service to take on Amazon Prime – TechCrunch
Photo: Walmart
Discussion Questions
DISCUSSION QUESTIONS: Is Walmart’s two-day ShippingPass subscription service a major threat to Amazon Prime? How does Walmart’s private trucking fleet, store base and overall logistics infrastructure match up against Amazon’s?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Doug Fleener
President and Managing Partner, Sixth Star Consulting
Well, the problem is much more a last mile problem than it is a long-haul problem, so I just don’t see how Walmart has an advantage. Walmart’s infrastructure is built for tonnage, not eaches. In fact, it didn’t prove all that good for LTL deliveries either. Hence their challenge with Neighborhood Markets (well, one of their challenges, anyway).
I don’t see them shaving a full day off at all. Plus, they’re not going to put their whole assortment in regional DCs, and that puts them right into the same situation Amazon has, at best.
Walmart really has a lot of work to do in e-commerce. Sure, they do a decent job at shipping, and their new efforts will speed things up. But, they are no match for Amazon. I recently ordered a paperback book from Amazon and it arrived on Sunday, two days after I ordered it. Online shoppers favor Amazon because of their assortment, service, AND shipping. Walmart may win on price sometimes, but they lose on the other three so I see this as a step in the right direction, but not a big step. Oh, and then there is the $49 fee. Amazon gets away with their Prime fee because they are superior on so many things, but Walmart doesn’t have that luxury and $49 is real money to many Walmart shoppers.
If any company should be able to challenge Amazon’s dominance of e-commerce, it should be Walmart. Walmart has the knowledge, skills and deep pockets. But as of now, Walmart has not been able to close the gap. Finding items on its website is difficult and it has not been able to go omnichannel. Perhaps Walmart will do better with logistics, but if people don’t consider the site a “go-to” option for e-commerce will logistics really matter?
It’s not about matching but exceeding. It’s not about copying but innovating. It’s not about incrementalism but taking bold moves. It’s about breaking free from the status quo and overcoming the huge historical investments that inevitably anchor you in the past.
I agree with Paula in that this isn’t a last mile issue — it’s a business model approach and having a view of an emerging retail world. From my perspective, Walmart can and ought to make a huge positive impact on what that future will look like, but it will not come easily.
There are two factors here that suggest Walmart may NEVER catch up. One of course is Walmart’s pallets logistics infrastructure, making deliveries to the store, which they have to convert to an eaches delivery mode, to the shopper. The second is that they have leveraged for decades their unpaid “stock pickers,” aka shoppers, in their neighborhood “warehouses,” aka stores.
This is where successful management and operational habits, can become albatrosses of failure, when the rules of the game have changed. And many bricks retailers are doomed to failure, as their very best game begins to be a losing game under the new, modern rules. Change or die! I respect obvious efforts to change, but it is mentally easier for a new player that is honing their expertise, from scratch, in the new game — with ZERO investment in the old game — mentally or capital wise.
I think Amazon will see this a threat regardless of how well they pull it off. We also know it takes a while to turn that big Walmart ship around, but I do think they’ll eventually get there. Which begs a different question. Will Amazon still be “there” when Walmart gets there? I don’t think so.
Amazon vs. Google, Amazon vs. Walmart … Today’s theme: Battle of the Titans.
Walmart has always been about price; is it wise for them to compete on service? I don’t know, but it gives me pause when a company gets into a race-to-the-bottom with a company that has yet to be consistently profitable (at least in their retail portion).
As for the basic question: is the world’s largest retailer — one (still) many times as large as Amazon — a threat? … Uhh, yeah.
Walmart’s two-day ShippingPass subscription is definitely a threat to Amazon Prime, especially for those consumers not interested in some of Amazon’s extra perks like downloading books or streaming music and videos. Walmart is definitely a force to be reckoned with from a logistics perspective. According to MWPVL International Walmart has 166 distribution centers in the U.S. and Amazon has 77. And that does not take into account the 4,500+ Walmart stores in the U.S. that could/should/will be used for fulfillment.
I believe Walmart has a great opportunity to beat Amazon in the battle of expedited delivery, purely based on their PHD in logistics and store/DC locations (depth and breadth). As the expected delivery time frame continues to be compressed, and same-day delivery becomes the norm, Walmart’s extensive network of stores that can be leveraged for distribution will make it difficult for anyone to compete from a delivery cost and timing perspective. Amazon doesn’t have the diverse distribution centers or store locations that Walmart has to make product available for same day, or shorter, delivery.
On the flip-side, the big thing Amazon has going for it is competitive prices (often lower than Walmart) and the phenomenal breadth of product variety and assortment from a wide variety of suppliers. Walmart will need to expand its online product offerings and prove that they can reliably pick, pack and ship for home delivery from both distribution centers and store locations to win the battle of the last few miles. There is definitely a battle brewing here…
Walmart appears to be focusing on the logistics side of online, which while notable, may do little to close the gap between itself and Amazon. Consumers shop online for four primary reasons: Selection – access to a deep range of goods, Painlessness – both fun & fast, Price Transparency, and Discovery. Currently, Amazon wins the battle in all four categories. Plus, Amazon has developed a customer intimacy that is second to none.
It’s interesting that the market capitalization of Walmart, the world largest retailer is over $100B less than Amazon’s market capitalization (Amazon Market Cap = $316B; Walmart Market Cap = $210B) and the gap is growing larger every year. This gap may be reflective of the online gap that exists between the two in terms of size and growth.
While Walmart is probably the best equipped retailer to challenge Amazon. I’m not sure if this is a major threat. Is reducing shipping time by 1 day to match Prime delivery speed really going to convince someone to choose Walmart over Amazon? And given the trend towards get-it-now / on-demand delivery, I wonder if by the time they are able to roll this out on a much larger scale, Amazon will have made 1-day delivery the new norm.