Walmart hinted it would add free one-day shipping to counter Amazon — and it reveals a hidden advantage

Sarah Halzack/The Washington Post via Getty ImagesWalmart has been beefing up its online-order pickup options.

Amazon’s latest move is likely to change the way online shopping is done across the board.

Amazon announced during its quarterly earnings call last Thursday that it had started transitioning its free shipping for Prime members to one day from two. The announcement shook the retail industry, from customers to competitors.

Walmart, which has emerged as Amazon’s chief rival both online and off, didn’t miss a chance to chime in.

Walmart hinted in a snarky tweet on Friday that it would start doing the same thing without a subscription.

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“One-day free shipping…without a membership fee. Now THAT would be groundbreaking,” the tweet said.

It finished with a hint of a promise or, if you’re Amazon, a vague threat: “Stay tuned.”

Walmart unveiled its free two-day shipping to match Prime’s in 2017, with the caveat that it could be applied only to orders totaling more than $US35.

Amazon has built up an immense network of fulfillment centres to bring its product closer to customers and ship things out more quickly than ever. Moving that to one-day shipping will no doubt be more costly, as Amazon told analysts on Thursday that in the coming quarter it would absorb $US800 million in costs related to making one-day shipping a reality for millions of items.

A built-in advantage

But what if instead of operating 75 fulfillment centres and 25 sortation centres across the US, each measuring hundreds of thousands of square feet, Amazon had thousands of smaller ones?

That’s pretty much what Walmart already has with its more than 5,000 US stores. A stat that Walmart executives like to whip out is that 90% of the US population lives within 10 miles of a Walmart store.

Walmart already uses its stores to fulfil online grocery orders, an initiative that it has been growing. Walmart has opened pickup centres in about 2,000 stores, which is nearly half of its US store fleet. This means that there are pickup centres within 10 miles of 70% of the US population, according to Digiday.

Between 11% and 13% of Walmart customers use its online grocery service, according to an analysis by Cowen & Co.

Most of Walmart’s grocery efforts have been for its click-and-collect service, where customers drive to the store and pick up their online orders. Walmart is also experimenting with grocery delivery, partnering with Udelv and Ford for deliveries using autonomous vehicles, but those plans are less advanced.

Walmart also has beefed up its pickup service, investing in giant automated towers, positioned near the front of stores, that customers can interact with to retrieve their online order.

Either way, much of the process is the same: The order comes in, and workers pick the product from the store. Walmart stores are huge, selling 142,000 different items.

Walmart does not yet fulfil online deliveries through its stores, but its closest physical competitor, Target, does.

Target also offers same-day delivery through the Instacart rival Shipt, a company Target purchased for $US550 million in 2017.

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“Digital growth at Target isn’t coming at the expense of our stores,” Target CEO Brian Cornell told investors in a meeting earlier this month. “It’s making stores more relevant.”

While most of the time legacy retailers seem to be fighting from behind, when it comes to being closer to the customer, they already have that figured out.

“Both Walmart and Target are leading Amazon in terms of these shipping options – they are the ones with the best solutions already in place,” John Zolidis, the president of Quo Vadis Capital, told Business Insider’s Hayley Peterson in a recent interview.

In fact, there’s good reason to believe that one-day shipping is simply a stopgap before the ultimate game changer: free same-day delivery.

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Forget one-day shipping: same-day is the ‘real battleground’ where Amazon, Walmart, and Target, are sparring

The next step is leveraging this advantage in a way that is both cost-effective and customer-friendly.

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