Special Deliveries

As we continue to witness the battle of brick-and-mortar versus online shopping, it’s interesting to see Walmart’s latest ploy to “one-up” their online competition. Their new Walmart To Go service is offering customers same-day delivery of online orders for just $10. While the initial test period is expected to last only through the holidays, the possibility that this could stick makes me think that Walmart To Go might ultimately have some huge implications for brick-and-mortar retail. The big question, of course, is will it work? Can Walmart pull it off? I definitely see some reasons for optimism, but there is plenty to be skeptical about, as well.

I think the fact that items will be shipped directly from Walmart’s stores, instead of from a warehouse or distribution center, is both a positive and a negative. In one sense, it’s fascinating to think about the potential of leveraging more than 4,000 Walmart locations across the country as “built-in” distribution centers. Compare that to Amazon, which currently has only 40 distribution centers nationwide, and it seems Walmart may have the upper hand. However, delivery infrastructure is complex and expensive — and requires much more than just stores. Not only will it cost Walmart more to select, pack and ship items from retail stores than it would if they had true distribution centers, but they will have to rely on UPS to do the actual delivering. This is an expensive and labor-intensive undertaking.

Beyond the logistics, I find the underlying motivations behind this move (and the implications down the road) to be even more interesting. This feels to me like a direct shot at Amazon, especially when you consider the fact that Walmart booted Amazon’s Kindle tablets and e-readers out of their stores just last month (as did Target, I might add). I think it’s also an attempt to goose Walmart’s online sales, which only represent 1 percent of the brand’s total sales (I have to admit I was shocked at how low that number seems). You would think that a broader rollout of Walmart To Go would have a positive impact and ultimately boost those numbers.

Something else to think about is who will most likely be using this service. This initial rollout is currently available in Philadelphia and northern Virginia, with Minneapolis, San Jose and San Francisco planned for later in the month. So, it would seem the obvious demographic is people who live in urban areas, which also means — for the most part — people who don’t have cars. Maybe Walmart is looking at this as a way to get some market penetration into some denser urban environments without the headache and expense of actually opening up brick-and-mortar locations. It also might be a way for Walmart to make inroads with a younger and generally more sophisticated urban customer — a demographic that the brand currently isn’t particularly strong with.

The timing of this move is also interesting, coming as it does at the busiest time of the year. With just a few select markets, it’s definitely doable — but will it translate nationally and year-round? One caution flag is that Barnes & Noble and some office supply stores already offer a similar kind of service, and it hasn’t really paid off in big ways for them. Walmart is also not making their full in-store selection available: customers can choose from about 5,000 items (a list that does not include grocery products). So, while there is lots of potential here, it is far from a given that Walmart To Go will be a game-changer. If the discount retailing giant does pull it off, however, what would that mean for store size and broader retail real estate trends? I think a successful Walmart To Go might add a bit more momentum to the trend toward smaller stores instead of larger formats — but it also might encourage building more stores to enhance distribution networks.

Success or failure, this promises to be one of those defining moments in the ongoing tug of war between brick-and-mortar and online retail. Both sides have a pretty firm grasp on the rope. I, for one, am eager to see who gets pulled in which direction — and how far they go!

What do you think? Can Walmart pull this off? Will other retailers follow suit if Walmart has success? Will we finally see a more level playing field between brick-and-mortar and online retail? Please make a public comment below or feel free to e-mail me privately at jeff@jeffgreenpartners.com.

Click here for past columns by Jeff Green.