The Wall Street Journal talked to people who claim that Walmart’s intense focus on supply-chain logistics for its retail stores has caused the company to falter when it comes to handling online customers. Walmart can easily get pallets of product from distribution warehouses to outlets in far-flung parts of the country, but it is having trouble getting online orders into the hands of customers at a time and price that is competitive.
Insiders say that Walmart has spent the last decade talking about becoming an e-tail powerhouse, but not actually doing much about it. One former Walmart.com exec tells the Journal that every year, the e-commerce folks would start a “five-year planning exercise, but the plans were never executed and management would say the sales weren’t there to justify the investment capital… Even now e-commerce is a rounding error in the U.S. market.”
And so while Amazon has been building a network of warehouses and ironing out the wrinkles in its delivery systems, Walmart.com has been resorting to using section of retail distribution centers and third-party warehouses to handle some of its online business. As a result, Walmart’s shipping costs are about 1.5 times that of Amazon’s.
Not only is it costing the company more, but the customer is waiting longer. Walmart.com placed 18th out of 25 in a 2011 survey of delivery times for the country’s most popular e-commerce. The average wait time for a Walmart order was 4 days, compared with 2.7 days for Amazon, which ranked fifth overall.
Meanwhile, Amazon’s sales totaled $61 billion last year and Walmart.com only took in an estimated $7.7 billion. That’s certainly nothing to sneeze at, until you realize it’s only about 2% of the retailer’s total annual sales.
Online retail is only going to continue to become more popular as it becomes easier to place orders from anywhere, and as delivery times shrink to same- or next-day. If Amazon can make a nationwide success of its new grocery delivery service, that would cut further into Walmart’s market share.
Walmart says it is finally getting wise to its status as an e-commerce also-ran, and swears — seriously, this time — that it’s investing time and labor into catching up with Amazon.
But that’s requiring some scrambling and some creative thinking. Given that a large number of American consumers live within a short drive of a Walmart store, the company is looking at its 4,000+ stores as de facto distribution centers. We’ve mentioned previously that the company is considering a system that would reward vetted customers for delivering products to shoppers in the area, and its test of in-store lockers for customers to pick up goods ordered online. The company is also testing a system that has retail employees pulling items off shelves, then packing and shipping these items straight to customers.