Photo: Walmart
Will free two-day shipping from third-parties give Walmart an edge for the holidays?
Walmart.com’s primary answer to Amazon Prime has been that it offers free two-day deliveries on orders of $35 or more without a subscription fee. The offer, however, has only applied to goods sold by Walmart. Starting next month, that will begin to change. Walmart announced that it will expand free two-day delivery to millions of items sold by third-party sellers on its marketplace.
In announcing the expansion of its free delivery program, Walmart said that its customers love being able to get orders shipped quickly without having to pay a subscription fee. The company’s site will begin tagging items from hundreds of “high-performing marketplace sellers” and expand the offer going forward.
Walmart also acknowledged the connection between “a great product return experience” and “customer satisfaction and repeat purchases.” To that end, the retailer is looking to expedite the return process for goods purchased from third-party sellers. Customers are now able to sign into their Walmart account and print out a return label to ship unwanted items back to the marketplace vendor. They will also soon have the option of returning these same items to any of the chain’s 4,700 stores.
The latest moves by Walmart are intended to make shopping more convenient for its customers heading into the busiest season for the retailer and its many rivals. Target, CNBC reports, offers free two-day shipping plus a five percent discount on all items purchased by holders of the chain’s REDcard. Customers shopping on Target.com who do not use the retailer’s card get free two-day shipping on eligible orders of $35 or more.
Walmart’s commitment to making shopping easier for its customers took a PR hit last month when The Wall Street Journal reported that the retailer was marking items out-of-stock online when it determined that the cost of delivery was too high because of the distance from its warehouse to the customer’s homes. Individuals who received out-of-stock messages were given suggestions for similar items that were at warehouse locations closer to their homes.
Discussion Questions
DISCUSSION QUESTIONS: Will the addition of free two-day shipping from third-party sellers and easier returns on items bought from its online marketplace help Walmart increase its holiday sales? What sort of challenges might Walmart face in fulfilling its promises to customers?
Poll
BrainTrust
Ananda Chakravarty
Vice President, Research at IDC
Rich Kizer
Principal, KIZER & BENDER Speaking
It certainly will help Walmart push holiday sales, almost all discounts do — but it needs to be advertised and simplified through a strong marketing campaign. Returns at all Walmart stores is big — many customers hesitate to buy because of the perceived hassle of potential returns. On the operations side, there might be substantial logistics issues, managing returns at stores, third-party logistics, drop ship arrangements and more. I suspect Walmart has already accounted for expected changes before its announcement — we’ll have to wait to see if Walmart scrambles after setting the stage.
In the words of Yoda — “Do or do not. There is no ‘try’.” Walmart must do free two-day shipping to remain competitive. However, there are inherent dangers in working with third parties during the peak selling season of the year. There is no respect from customers for “trying.” Walmart must get this right or there will be long-term repercussions post holiday season. When a child doesn’t get their toy for Christmas, the customer will blame Walmart, not the third-party delivery company. On the up side, if Walmart does execute this well, they will not only earn holiday sales but also customer respect and legitimacy. Fingers crossed that Walmart will do this well — we need a viable alternative to the A Team.
Going into the holiday shopping season, Walmart wants to avoid missing out on potential sales due to shipping or subscription fees vis-à-vis the competition. Extending the free two-day shipping to third-party sellers and creating an easier returns process will remove conversion hurdles and give the company a legitimate offensive weapon in their ongoing battle with Target and Amazon.
Playing catchup is always tough. Yes, this will help, but only in the sense that not offering it might crush Walmart’s season. And the proof is in the shipping — and returns. Walmart is now risking its brand by indemnifying a host of third-party sellers. Maybe it will work and maybe it won’t. We’ll know by January.
Good for Walmart. Now they have to promote this heavily; or it will be no more than a try. This can be successful for them as they continue their battle with Target and others attempting to catch Amazon. In this case being second is not that bad, is it? This will be interesting to watch as the season gets ready to heat up.
I agree with other comments that this feels like a strong – and perhaps necessary – play for the holidays. However, I I do worry that we may never break the relentless persistence of expectations for free shipping. The associated margin hits we incur are so challenging, and we never seem able to break the cycle. Instead, season after season, we take actions that perpetuate and reinforce shopper expectations for something that takes a huge toll on the bottom line of every retailer – even (or perhaps especially) Amazon. In a perfect world, I would wish Walmart would instead institute a paid Marketplace subscription plan that includes free shipping as a perk. Unfortunately, our world is far from perfect…so on we go with more and more free shipping perks.
Will Walmart be able to control the shipping process of the third-party vendors? Promising two-day delivery and not meeting expectations would be devastating. Making the return process easier should help encourage more online shopping. Walmart has not had an easy time becoming competitive in the area of shipping. Missteps have hurt. This process has to work really well for Walmart to be competitive in this area. Even if it works really well, it does not make Walmart the best in this area.
Walmart will not let this program fail, they can’t. It is a highly-competitive business environment in the minds of customers that creates this comparison service platform. Walmart knows this. I will go all-in with Walmart on this one. I am sure that they’ve done their homework.
How can free two-day delivery on all items and easier returns not help sales? Amazon has taught consumers that they don’t have to wait for whatever they order online. Retailers that want to compete have to be generous – and creative – with shopper opportunities.
Walmart stating that they want to make the customer shopping experience easier and better is a noble cause, but is two-day free delivery a necessary part of that? Great to see that they are taking the responsibility for returns and making that part of the process easier. Customers will really appreciate that as it shows genuine drive for improvement. However, what customers want on deliveries is consistency and certainty, to make it two days and then stock out items because it is too expensive is not going to help the customer or the brand. When customers are planning their holiday purchases, getting the order in a set number of days is satisfactory as long as they know that date. Promising two-day delivery and then not getting it in time is a major backward step.
The supply chain costs of reverse logistics on potentially large volumes of returned items could be interesting and the third-party traders are going to have to pick up a lot of that tab. If not, Walmart may find a hole in their profits after the holiday. Overall, this is a positive step and should be applauded.
Customers want convenience, and trust that the company they are buying from will take care of them, deliver on time, and make it simple and easy to return. When Walmart catches up to Amazon for these factors (which they seem to be well on their way to) the differentiation becomes what — price? Oh and the fact that Walmart has some 5,000 physical locations they can use as part of the delivery/return network. Ease of purchase and returns across a broad assortment are almost table stakes in competing for online business. Leveraging all those physical locations as part of the equation is the winner.
“Free shipping” is now an expectation. Amazon set the bar and others have followed. By the way it’s not really free. Someone is paying for it, and it is the customer. It’s just built into the price. But, if the price still remains competitive, the customer and the retailer win. Extending the two-day free shipping offer from third-party retailers is attractive. The success of this program will be in logistics. What Walmart doesn’t want to happen is for these third parties to let Walmart customers down. Bottom line: It’s all about convenience and Walmart is doing its best.
Anything with free shipping is a powerful motivator. I’m learning that from my Millennial children. They proactively search for alternative vendors that offer free shipping. They are put off when someone actually wants to charge them for shipping. The new reality? Certainly the expectation! With this year’s demise of Toy “R” Us, the big retailers will be fighting furiously for the toy shopper this holiday season. Free shipping will be a powerful differentiator.
Free two-day shipping is now table stakes for online retailers, as Amazon, Target and now Walmart are offering this service level, and consumers expect it. This was a necessary move by Walmart to compete with the other online giants during the holiday season. I also believe the lack of a subscription fee is going to be a business driver for the holiday season. The challenge is to make the margin work when eating the shipping cost.
Another challenge will be to ensure that the third-party resellers meet the two-day delivery commitment, as Walmart has to assume that they will execute as promised. Walmart doesn’t touch the product and if the third-party resellers don’t deliver on time, especially if it is late for the holiday, consumers will be very upset. This anger will be transferred to Walmart, since they ordered it from the Walmart marketplace. It is a risky, but necessary decision for Walmart.