London - Wal-Mart Stores will offer discounts on more than a million online-only items that customers then pick up at stores, part of an effort by the world’s largest retailer to challenge Amazon.com.
Taking another page from the Jet.com business it bought last year, Wal-Mart will first cut prices on about 10 000 web-only items such as Britax car seats and Lego toys, according to a statement. The Pickup Discount program, which starts on April 19, will expand to more than a million so-called “long tail” items by the end of June, the company said.
The Pickup Discount effort builds on Jet’s Smart Card business model, which provides discounts to customers who package items together or forgo returns.
“We are beginning to take the ethos behind Jet’s Smart Cart and marrying it with Wal-Mart’s operational efficiency,” Marc Lore, head of Wal-Mart’s e-commerce business, said in the statement. “Quite simply, it costs less for us to ship to stores. So, our customers should share in those savings.”
The move is Lore’s latest step to check Amazon’s growing online dominance, and shows how he’s keen to meld Jet’s innovations with Wal-Mart’s 4 700-store network. Earlier this year, Wal-Mart scrapped a free-shipping program that competed with Amazon’s Prime membership and replaced it with free two-day deliveries for orders of at least $35. Amazon will control half of the US e-commerce market by 2021, according to analysts at Needham & Company. They estimate that the online giant currently commands 34 percent, compared with Wal-Mart’s less than 5 percent.
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“Wal-Mart is trying to move quickly and is stepping up its game,” Robin Sherk, an e-commerce analyst at Kantar Retail, said by phone. “The idea of passing cost savings onto the shopper is something that could be quite disruptive.”
The discounts vary by item and reflect the savings to Wal-Mart for shipping the orders to its stores on one of its more than 6 700 trucks, rather than to a customer’s house. The $148.05 Britax B-Safe 35 infant car seat is reduced by 5 percent to $140.65, while the Lego City Great Vehicles Ferry is discounted 11 percent to $21.44. Other products in the program are Coleman coolers and Vizio televisions. In an interview, Lore called the program a “game-changer” and said the level of discounts could be adjusted going forward.
“Part of the reason why we are launching 10 000 products to start and growing it over time is that we want to perfect that discount,” he said.
Wal-Mart’s web investments - which also include acquisitions of sites like Moosejaw and ModCloth, a new network of e-commerce distribution centres and an expansion of online grocery - have prompted belt-tightening elsewhere. The company has reduced headcount at both its West Coast technology hub and at its Bentonville, Arkansas, headquarters. Chief Financial Officer Brett Biggs said at a March investor conference that the company needs to be “a little tougher on ourselves around expenses” and “rejuvenate” the famed low-cost culture that patriarch Sam Walton instilled.
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The term “long-tail” refers to the seemingly endless assortment of products that online retailers can offer, compared with the shelf-space constraints that force physical retailers to focus on a more limited assortment of top-selling items. A typical Wal-Mart supercenter offers about 120 000 items, while its website currently has 35 million products available.
Wal-Mart paid $3.3 billion for Jet in August and quickly put founder Lore and his lieutenants in charge of its online strategy. Lore used to work at Amazon, which acquired an earlier business of his, Quidsi, operator of sites like Diapers.com and Soap.com. Last month, Amazon said it’s shutting Quidsi because it couldn’t make a profit, eliminating more than 260 jobs.
Wal-Mart’s online sales rose 29 percent last quarter, helping its holiday results top estimates. So-called click-and-collect orders, which are picked up curbside at stores, increased 27 percent in the period. Some curbside pickup customers do enter the store to buy additional items, Lore said, declining to provide specifics.
“The thing that is smart is when you encourage someone to come to the store, it creates a new trip driver,” Kantar’s Sherk said.