When you’re the largest brick and mortar retailer in a world of cyber-buyers, how do you defend your territory? By leveraging what could be your biggest liability — your stores.
In the week ahead, that’s how Walmart will respond to the ever-increasing competition posed by Amazon. What had been a destructive price battle has turned into an all-out war for the hearts and wallets of consumers. The two retail behemoths represent the clash of shopping cultures — pursuing aisles versus surfing websites — and the business models built to support them.
Amazon’s approach stuffs inventory into strategically placed warehouses, avoiding the cost of actual stores, and using its volume to drive deals with shippers to get merchandise the last mile to consumers’ doors. Walmart, in the age of e-commerce, has been saddled with the infrastructure of a different age of retailing — a network of thousands of stores, their miles of aisles and over 100,000 products in each location.
As Walmart is discovering, that network may be more of an asset than it had thought. Beginning with 10,000 items, Walmart will allow its shoppers to buy online and pick up in stores. That part is not new. So what Walmart is doing is offering deep price discounts on those items for in-store pickup. It’s using its size to undercut Amazon on price and hoping to use its stores as leverage in bridging the last mile to buyers’ homes.
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Walmart will expand the offering to one million items by June. If successful, Walmart stores may mimic warehouses as much as retail experiences. Shareholders can only hope it will help mimic Amazon’s stock performance. Over the past year, Amazon shares have jumped four times as much as Walmart’s.
Walmart still sells more than $1 billion of stuff per day on average each year. That’s about four times as much revenue as Amazon. But all of Amazon’s sales are online compared to just $14 billion for Walmart. And as more buying is moving online, Walmart has been searching for strategies to entice its price-sensitive buyers to think of it — not Amazon — as the place to find deals in cyberspace.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.