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CNBC reports that Walmart increasingly is using its fleet of stores - about 4,700 just in the US - as the foundation for a network of fulfillment services that will support and differentiate its e-commerce business, especially against Amazon.

The clock is ticking.  AdWeek reports on a new study from digital commerce service Edge by Ascential, that "predicts Amazon will surpass Walmart in its share of the overall U.S. retail market in just two years. The findings come despite a recent slowdown in the pandemic surge in ecommerce growth that led to Amazon’s first quarterly loss in seven years earlier this year … The report authors expect Amazon to add $294 billion to its retail sales by 2026, growing its share of the retail market to 14.9% with Walmart at 12.7% and Costco the third largest at 4.4%. Walmart and Costco currently control around 13.2% and 3.8% respectively."

But it is its stores, Walmart believes, that will give it a significant advantage over Amazon, which continues to dominate e-commerce with a close to 40 percent market share.  They will, the CNBC story suggests, develop into "hubs for (Walmart's) e-commerce business, serving as launch pads for delivery drones, automated warehouses for online grocery orders and departure locations for direct-to-fridge drop-offs. Eventually, they will help pack and ship goods for individuals and independent companies that sell on Walmart’s website through its third-party marketplace."

“The store is becoming a shoppable fulfillment center,” Tom Ward, chief e-commerce officer for Walmart U.S., tells CNBC.  “And if the store acts like the fulfillment center, we can send those items the shortest distance in the fastest time.”

Meanwhile, CNBC also reports, Walmart said this morning that "it plans to build four new fulfillment centers that use automation to pack and ship online orders more efficiently, with the first location opening this summer in Illinois. For customers, the new warehouses will mean next-day or two-day delivery could be more common for items including cereal and T-shirts."

At Walmart’s existing fulfillment centers, the story says, "employees can walk nine miles or more a day to pluck items off shelves and lug them back to areas for packaging, said Michael Prince, Walmart’s vice president of supply chain innovation and automation.  That won’t be necessary at the new warehouses, where an automated system will retrieve items from an expanded storage space and shuttle it to an area where an employee packs it in a box, which will be custom made to fit the order’s measurements."

Here's how CNBC frames the story about store-based fulfillment:

"Walmart is leaning into two key advantages to drive its e-commerce business: its roughly 4,700 stores across the United States and its dominance in the grocery business. Ninety percent of Americans live within 10 miles of a Walmart store. The company is the largest grocer in the U.S. by revenue. Walmart wants to expand its assortment of merchandise, improve the customer experience and increase the density of delivery routes to turn e-commerce into a bigger business.

"The Covid-19 pandemic created an opening for Walmart to expand its online business. The retailer’s e-commerce sales surged, helped in large part by the curbside pickup service it launched years before other retailers scrambled to set on up during the pandemic. One dollar out of $4 that Americans spent on click-and-collect orders last year went to Walmart — more than any other retailer, according to an Insider Intelligence estimate."

CNBC notes that "Amazon has 39.5% of online market share in the U.S. compared with Walmart’s 7%, according to estimates by research firm eMarketer. Last year, based on the 12-month period from June 2020 to June 2021, consumers spent more money at Amazon than the big-box retailer for the first time, according to company filings and estimates by the financial research firm FactSet.

"But the e-commerce environment has gotten tougher in recent months. Gains have slowed dramatically as more customers return to stores. Even Amazon saw stagnating numbers in the most recent quarter, reporting its slowest sales growth rate in about two decades."

But both Amazon and Walmart, it seems fair to say, believe that this is just a temporary stall, created by a perfect storm of high inflation and a post-pandemic desire to get off the couch.

KC's View:

A few things here…

The prediction about Amazon surpassing Walmart in terms of sales isn't really much of a surprise.  I'm pretty sure that Tom Furphy has been making that prediction, based on his reading of both companies' sales trends, for about as long as we've been doing The Innovation Conversation here on MNB.  (Which, for the record, has been since 2015.)

The term of art that we've used around here has been "Clash of the Titans," mostly because we like to use movie titles and quotes whenever possible.

Walmart won't go down without a fight, and in some ways I think both Walmart and Amazon are happy to have the other - it makes it easier to argue against antitrust actions focused on lack of competition, and, quite frankly, the best heavyweight champions are defined by how they did against great challengers.

As I've said here before, it is important to remember that Amazon and Walmart see their roles in the world in fundamentally different ways - Amazon wants to be inextricably intertwined in every aspect of your life, and Walmart wants to sell you more stuff.  Lots more stuff.  There's no right or wrong about these two approaches - they're just different, with their own opportunities and limitations.

Here's the question I would ask about Walmart's approach:  Are its core customers on board with its strategic vision, and/or does it depend on a large-scale onboarding of a new and expanded customer base?  I may be wrong about this, but it seems to me that Amazon's customers - present and future - already have bought into its definition of the future, which gives it an advantage.  It remains to be seen whether Walmart's core shopper demographic feels the same way about its vision of the future.

As for Amazon … it is facing its own headwinds.  There's an overbuilt fulfillment system.  Persistent labor issues.  Legislative and regulatory challenges.  A seeming inability to master the grocery business, especially at Whole Foods.  Inflation that is driving up costs.  And so on.

Plus, if nothing else, we've learned over the past couple of years that winds can shift dramatically almost overnight, which means that businesses have to tack this way and that to maintain momentum, even if it means they can't take the most direct route to their destination.

Economic experts seem to differ somewhat on what is happening.  I saw one headline that described the economy as "storm clouds with a chance of hurricanes," while another expert noted that "there are hurricanes every year," and that we shouldn't overreact.

Either way, Amazon and Walmart need to consider the words of Robert Redford's Nathan Muir in Spy Game: