Walmart Slowing Store Openings, Accelerating Distribution Centers

Image courtesy of Will

It’s no secret that Walmart is gunning for some of Amazon’s customer base: gobbling up e-commerce site for $3.3 billion, mulling the idea of investing in Amazon competitor Flipkart, launching the $50/year Prime-rival Shipping Pass, and increasing distribution channels. As an indicator of the retailer’s online-focused future, Walmart has announced it is slowing the growth of its bricks-and-mortar stores while building more warehouses to expedite deliveries.

The company said Thursday that it would begin to scale back the number of stores it plans to open in the U.S. over the next two years, with 130 stores opening in the next fiscal year (ending in Feb. 2017) and 55 in the 2018 fiscal year, USA Today reports.

While the decrease in new stores — which will represent just 1% growth in 2018 — may come as a surprise, it probably shouldn’t. For starters, the company announced earlier this year it would actually close about 150 stores (though most of them were smaller-footprint Walmart Express locations), and it recently put many of its eggs in one basket: online sales.

To that end, vice president of e-commerce supply chain Justen Traweek tells Reuters that Walmart is on track to double the number of giant warehouses dedicated to online sales to 10 by the end of 2016.

Previously, industry consultants had estimated Walmart would have just eight distribution centers by the end of 2017.

The company also relies on more than 100 smaller online warehouses, stores that stock online orders, and 160 stores that serve as distribution centers, Reuters reports.

Still, the large warehouses are perhaps the biggest cog in Walmart’s e-commerce strategy: the large buildings, with their abundance of products, allow the retailer to ship items in one package, rather than multiple packages from different stores around the country.

In turn, this cuts down on the time it takes to ship products, putting the company and its $50 Shipping Pass more in line with Amazon’s two-day Prime membership shipping.

“We have doubled our capacity in the last 12 months and that allows us to ship to a majority of the U.S. population in one day,” Traweek tells Reuters, noting that the company could eventually offer one-day shipping.

Online sales represent about $14 to $16 billion of Walmart’s approximate $355 billion in annual revenue, USA Today reports, citing Moody’s Investor Service.

While online sales are just a small portion of Walmart’s bottomline, executives with the company expect that to change in the future as the retailer combines all of its services.

“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail,” Walmart CEO Doug McMillon said in a statement to USA Today. “Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly — so that’s what we’re doing.”

Wal-Mart’s next move against Amazon: More warehouses, faster shipping [Reuters]
Walmart to slow U.S. store openings [USA Today]