Published on: October 10, 2012Walmart said yesterday that it has begun testing a same-day delivery business model for products sold online in several markets around the country, hoping that it can beat Amazon.com at its own game.
The move highlights the ongoing battle for retail supremacy between Walmart and Amazon, a battle with enormous stakes given that it is generally accepted that Amazon is likely to be roughly the same size as Walmart by the end of the decade. Indeed, offering same-day delivery is seen as being one way to encourage online shoppers to buy groceries," which could lead to more traffic, sales and market share.
According to the New York Times analysis, "The first retailer to master same-day delivery on a wide scale could attract customers who have avoided online purchases because they wanted items immediately, and encourage current shoppers to add products that they usually buy from supermarkets or drugstores, including celery and toothpaste."
Walmart will be able to do same-day delivery because it will be picking the products from its own stores - the ubiquity of which the Times suggests could give it an advantage in the marketplace.
"If Wal-Mart expanded its same-day shipping across the country, it would essentially transform local Walmart stores into 4,000 distribution centers," the Times writes. "Amazon, by contrast, had fewer than 40 distribution centers in the United States at the end of last year and has plans to add about 20 worldwide this year."
The Times notes that "Wal-Mart has been testing same-day grocery delivery for more than two years in San Jose, Calif., and now offers it in San Francisco." This new program "is already running in Northern Virginia and Philadelphia. It was introduced Tuesday in Minneapolis, and the San Jose and San Francisco areas that are already part of the grocery test will join the toys-and-gifts test this fall."
The pitched battle between the two retailers has been illustrated lately by moves they've made to gain the upper hand. Just recently, Walmart said that it would no longer sell Amazon-crated products such as its Kindle line; last year, Amazon threw down a challenge to Walmart and virtually every bricks-and-mortar retailer by encouraging shoppers to engage in "showrooming" - the act of checking out products in stores and then using their smartphones to order those items from Amazon.
- KC's View:
- As these two giants battle it out, there could be a lot of collateral damage; I think that retailers trying to compete with Amazon and Walmart are going to have to up their games, because there is going to be ratcheted up pressure to demonstrate and sustain their own differential advantages.
It is very smart for Walmart to test same-day delivery at a time when speculation is rampant that Amazon is expanding its fleet of distribution centers just so it can quicken its delivery times, and that it will use those warehouses to deepen its presence in the grocery business.
I think that Amazon - which I've discovered over the years is very good at under-promising and over-delivering - has set the bar pretty high for Walmart, so it'll be interesting to see how effectively the Bentonville Behemoth is able to develop a delivery infrastructure. And the Times makes the point that this can be an expensive business ... and traditionally, it seems to me, Amazon has been more willing than Walmart to invest in such initiatives and not worry about how it is viewed by Wall Street.
The games have begun.