Walmart Announces Next Day Delivery, Response at Amazon

Walmart responds.

The world's largest retailer will now offer buyers the ability to have their orders delivered online the next day after Amazon on April 25, promising a one-day delivery to all Amazon Prime members and spending 800 millions of dollars to improve its distribution infrastructure to make this possible. .

Tuesday, Walmart begins deployment of next-day delivery, starting with Phoenix and Las Vegas, the company said in a blog post. The option will be available in Southern California over the next few days. And it will reach about 75% of US consumers by the end of 2019, including 40 of the 50 largest metros in the US, according to Walmart.

Amazon has not yet detailed a schedule for its own shipping deployment the next day. But even before its announcement in April, the company had offered Prime members a delivery the same day and two hours in some markets, for some products and for an additional cost. Amazon's next-day shipping plan increases the number of items and postal codes eligible for expedited service.

Walmart does not disclose the cost of its latest delivery spurt. But the company says it's been working there for quite some time.

In January 2017, Walmart began offering a two-day free shipping for orders over $ 35, thereby lowering its minimum purchase threshold, which was $ 50 until then. He had already bought Jet.com for $ 3 billion in 2016 to boost his online business and compete with Amazon. This agreement helped to reach buyers in major cities, like New York, in less time.

"We've been working on this for a number of years," said Marc Lore, Walmart's e-commerce manager in the United States, about switching to an overnight expedition. "We have invested … and we are now in a position to reap the benefits."

For starters, overnight delivery will be available for about 220,000 "most frequently purchased" items online, said Walmart, including toys and electronics. The company has announced its intention to make more items available to ship the next day over time. And the option is only free for orders over $ 35. Amazon, for comparison, does not have a minimum purchase threshold for free overnight delivery, but requires customers to have a Prime subscription, which costs $ 119 per year.

"It's the future of Walmart.com's supply chain," said Lore. "The more products we add to this experience … the more profitable the orders will be."

Last month, when Amazon launched its new standard for all Premium customers last month, shares of Walmart and Target rocked as investors feared that retailers would be forced to spend more money follow the giant of e-commerce. .

"It's this nebulous called Amazon effect," said John Bonno, general manager of the retail sector at AlixPartners. "I think retailers are so scared. [They’re] So nervous that any new service offered by Amazon, retailers feel they need to go through milestones, "he said.

That said, companies like Walmart and Target have something of Amazon: networks of thousands of stores across the country. The stores help these companies provide a collection and collection option that allows the customer to place an order online, go to the store and pick it up the same day. Walmart, for example, says it's on track to allow pickup of online grocery orders in 3,100 stores and same day delivery in 1,600 outlets from here. the end of the year.

"Walmart wants to make the promise to do everything in its power to be as practical as possible," said Laura Kennedy, retail analyst for Kantar Consulting Group. "They have to meet buyers' expectations – Amazon has been defining them for 10 to 15 years."

According to a recent report released by UBS, it would cost Walmart $ 215 million in additional investment, based on the company 's e – commerce revenue, to match the shipping offer of the company. a day of Amazon. UBS added that it would be "quite feasible" for Walmart.

At a meeting held last fall, Lore had told analysts that Walmart was already able to reach 87% of the country with a next day delivery.

In the meantime, Amazon is already able to deliver same day and one-day delivery to 72% of the total US population, according to RBC Capital Markets.

Lore explained that the push towards delivery in a day was ultimately "a bargain" for Walmart. This means that customers will start receiving all their items in one box, because with overnight delivery, each order will be placed at the nearest distribution center, and only to that one.

If a buyer wants a package of diapers, a Star Wars toy, a coffee cup and a helmet, the next day, for example, all these items will have to be available in a warehouse. If an item is not available, the customer will be offered the option to "save for later" and order the others for the next day. Or again, the customer can still order everything – probably receive shipping in multiple boxes – for a delivery of two days or more. (Deadlines for overnight deliveries vary by market, Walmart said.)

Walmart has done "considerable work" to make sure to have the right items in the right distribution centers, said Lore. The company does not plan to stock up in its stores the next day.

Everyone does not adhere to the next day delivery, which will be the next important step for retailers.

If Walmart discovers that this effort is not profitable, the company will stop offering it, said Sucharita Kodali, a retail analyst at Forrester Research. She compared this situation to the one at which Amazon started offering shoes for day-to-day delivery in order to compete with Zappos.com. Then Amazon bought Zappos. "It was an unsustainable arms race (…) and they ended up stopping," she said.

"An immediate dispatch the next day is a burst of excitement in the short term.This is great for buyers.The customers are winners when Walmart and Amazon take it to them.But is this to long term?" Kodali asked. "At the macro level, it's not sustainable."

Instead, she thinks more retailers should rely on purchase options, in-store pickup, use of their real estate and save on shipping costs.

A recent Coresight Research survey found that about 46% of online shoppers in the United States had received an Internet order at a physical store in the last 12 months. Major retailers with this option were Walmart, Target, Best Buy and Home Depot, said Coresight.

"Consumers really like to shop [with click and collect], "Kodali said, retailers" should have realized this years ago. "

Target – which offers a free two-day shipping for all its credit card holders, without minimum purchase requirement – now offers a curbside option for buyers in more than 1,250 stores. It offers in-store pickup for online orders in all of its 1,850 stores.

Amazon, still in its rush to deliver the boxes to customers as quickly as possible, announced Monday that it would start offering its current employees up to $ 10,000 in startup costs in order to quit their jobs and create companies that offer Amazon packages. If accepted into the program, delivery aids will be able to rent vans to Amazon. The offer is open to most part-time and full-time Amazon employees, but not to Whole Foods workers.

Amazon shares have increased about 21% since the beginning of the year, while those of Walmart have increased by 7% and those of Target by 8% approximately.

– CNBC Michael Bloom contributed to these reports.