Walmart Wants To Dethrone Amazon Through Order Fulfillment
By Sam Lewis
Retail juggernaut unveils new distribution warehouses in an effort to catch online rival
On Tuesday, Oct 1, Walmart unveiled news regarding two new fulfillment centers. The new warehouses appear to be an effort to reduce delivery costs and fulfillment times, in hopes of taking a chunk of the e-commerce market from online retail giant Amazon. The online retailer has dominated Walmart in the e-commerce market with a huge selection of merchandise guaranteed to have two-day delivery.
Walmart opened the first of these fulfillment centers last week in Fort Worth, TX. The 800,000 square foot facility will handle the 2013 holiday season online order load with 275 full-time employees. The new Texas facility will allow the company to ship millions of items at a lower cost, and at a faster rate, says president of Walmart.com Joel Anderson.
The other new Walmart fulfillment center, opening in the first quarter of 2014, will be located in Bethlehem, PA, roughly 10 miles from Amazon’s Lehigh Valley warehouse facility. This facility will cover more than 1 million square feet, employing more than 350 full-time employees dedicated to filling online orders. The location of the new giant warehouse puts Walmart products within one day’s drive of one third of all American and Canadian shoppers. The addition of these two facilities puts Walmart’s company owned e-commerce fulfillment centers total up to three, compared to Amazon’s more than 40 fulfillment centers across the U.S.
Since Walmart is lacking Amazon-like numbers in terms of centers dedicated to web order fulfillment, it relied on extra space within distribution centers, intended to serve Walmart stores, to handle the online order load. This extra step in the fulfillment process added costs to shipping, which Walmart hopes to reduce with the addition of the web fulfillment centers. In addition to the new facilities, the company plans to combine brick-and-mortar stores and existing distribution centers to create what it is calling the “next generation fulfillment network.” Walmart and Anderson have not outlined how many additional warehouses will be built in this network.
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Despite Walmart entering the e-commerce world over a decade ago, online sales account for a fraction, $7.7 billion, of its almost $470 billion in annual revenue. Compared to Amazon’s more than $61 billion in online sales, Walmart has got some ground to make up. The company’s online sales have lagged behind its competitors, partly since it hadn’t developed a way to quickly and efficiently deliver goods to customers, until now.
It appears that Walmart has taken a page from Macy’s playbook. The famed retailer recently expanded its web order fulfillment centers to more than 500 locations company wide. Walmart has more than 4,100 stores across the U.S., with each store averaging 125,000 unique items. By combining the power of its brick-and-mortar store inventory with the newly announced web order fulfillment centers, Walmart’s “next generation fulfillment network” may put it in place to seriously threaten Amazon’s dominance of e-commerce.