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.”
Delivery savings
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.