Photo: Walmart
Will fulfilling third-party vendor orders give Walmart an edge over Amazon?
Walmart is looking to give third-party vendors more reasons to sell on its online marketplace. The retailing giant has launched a new service — Walmart Fulfillment Services (WFS) — that stores, picks, packs and ships items ordered from third parties on walmart.com. In true Walmart fashion, the retailer said its services will be offered at “one of the lowest prices on the market” and sellers will not have to pay a monthly membership fee to participate in the program.
“WFS is designed to help sellers generate more profitable sales of their inventory at scale, while growing their business with Walmart Marketplace,” wrote Jare’ Buckley-Cox, vice president, Walmart Fulfillment Services, Walmart eCommerce, on a company blog. “With WFS, they’ll gain a trusted partner that cares about their business and their customers and benefit from a more personalized experience. And as for customers, they’ll enjoy a larger assortment of great brands and products along with fast shipping, easy returns and dedicated customer service.”
Walmart has signaled that it intends to maintain the integrity of the program for consumers and third-party vendors with its vetting process for program participants. Customers ordering online from these merchants will see a badge that reads, “Sold by (seller), fulfilled by Walmart.
Participants in the program can take advantage of Walmart’s two-day offer, and NextDay delivery is on the way. Walmart will also handle returns and provide customer service for participants in the WFS program.
Walmart is looking to expand its roster of marketplace sellers to compete profitably against Amazon.com and other rivals online. More than half of the revenues generated on Amazon’s marketplace come from third-party sellers, with many paying the e-tailing giant to participate in its Fulfillment by Amazon program.
Amazon currently holds a 38.7 percent share of retail e-commerce sales in the U.S., according to eMarketer. Walmart, the second-largest player in the market, has a 5.3 percent share.
In related Walmart news, the retailer is combining the buying teams for walmart.com and its stores. According to an internal memo obtained by The Wall Street Journal, Walmart will create six category teams, which will be led by a single executive. The plan is for the consumable and food category groups to begin immediately under this structure, with others to follow.
- If You Build It (Together), They Will Come: Walmart Introduces New Fulfillment Service Built with Sellers, for Sellers – Walmart
- Walmart Fulfillment Services – Vimeo
- Walmart Fulfillment Services – Walmart Marketplace
- Walmart to Combine Online and Store Product-Buying Teams – The Wall Street Journal
- Target Cracks Top 10 US Ecommerce Ranking – eMarketer
Discussion Questions
DISCUSSION QUESTIONS: Will the launch of WFS help Walmart expand its roster of marketplace sellers and, in turn, draw more consumers to walmart.com? What will the launch of WFS mean for rival platforms and third-party providers offering similar services?
Poll
BrainTrust
Bethany Allee
Senior Vice President Marketing, PDI
Meaghan Brophy
Senior Retail Writer
This is a smart move for Walmart. Walmart’s logistical capabilities are unrivaled and I believe that offering these capabilities will be attractive to many marketplace sellers. But while this option will be attractive for marketplace sellers who cater to a Walmart demographic, I doubt that it will be a huge draw for those resellers who are less interested in Walmart’s shopper demographics. Nonetheless, this move by Walmart will certainly get Amazon’s attention as it provides marketplace sellers another significant channel for their goods.
This is what Walmart has been missing. Walmart has worked hard to make their shopping experience as seamless as the Amazon experience, but they were missing the diversity of products. The introduction of WFS not only bridges that gap, but it puts Walmart in a position to be a powerhouse. Walmart has the better reward/loyalty component (Savings Catcher) and the physical retail footprint — they are out-innovating Amazon when it comes to the shopping experience.
Congratulations Jeff Bezos for again being the puppetmaster that all others dance to. Like so much that Walmart is doing digitally these days, this is yet another catch-up to Amazon that the brand is trying to do. While Walmart has originated some ideas on its own (the Jetblack failure notwithstanding), so much of its digital strategy and presence is a “me-too” of what Amazon has done first.
I imagine many Amazon sellers will add WFS as a distribution channel, so any differentiation Walmart is trying to achieve will be nil. The one benefit may be that some disenfranchised Amazon Marketplace vendors will go exclusive with WFS, but none of it will add up to a significant market shift.
Yes, the WFS launch by Walmart will compete with Amazon’s FBA services. This should increase Walmart’s revenues, profits, reach, appeal, and online priority as more customers go to Walmart.com to find products to fulfill their needs.
Competition is always a good thing, as is choice. Walmart’s WFS solution enables the retail giant to offer third-party vendors fulfillment as a service and access to the ever-expanding e-commerce marketplace. There are certainly challenges because they are up against the Seattle based behemoth, who has been at this for years, and there is a brand awareness factor to consider as Walmart expands beyond their core customers and demographic base.
Walmart has expanding, sophisticated and extremely scalable supply chain fulfillment capabilities and, if marketed and executed the right way, this could reap significant benefits and become a meaningful revenue growth channel.
This is a smart move by Walmart – what this will allow is what is currently happening on Amazon – the shift of many brands from 1P to 3P. Let the brand financially own the inventory and just be the platform and logistics arm for the brands. They will save money, reduce risk and improve gross margins.
Walmart’s distribution and transportation network has scaled to compete with fulfillment services from Amazon. Walmart Marketplace’s biggest challenge is attracting consumers. Its customer adoption and loyalty lags Amazon by a lot. Hopefully its new fulfillment services and competitive fees will attract more products and, as a result, more customers. It appears that nobody is in a better position to challenge Amazon than Walmart.
This is a no-brainer. Honestly, it’s surprising that Walmart hasn’t offered fulfillment services sooner. This move will definitely result in more third-party sellers joining the marketplace. However, it’s less clear whether that will translate to additional customers. Amazon has such strong brand loyalty that I doubt many shoppers would switch to Walmart, even though there’s no annual fee for free two-day shipping.
Great to see someone taking the Amazon approach of re-selling their own internal capability. This will help Walmart in terms of building economies of scale plus getting a slice of revenue from sales of products from other merchants.
Trust is a key element here – if customers trust Walmart and that trust is honored it should bode well for Walmart.
This is really heralding the era of “co-opetition” and complex retail ecosystems. Key to this, as ever, will be technology – leveraging it in order to enable what Walmart’s ecosystem customers need.
While this is a smart move for Walmart, it’s not enough to close the 33 percentage point share gap between them and Amazon. But it will help grow the business for Walmart and attract more shoppers.
Long-term competitive advantage goes to Walmart. Why? Their physical stores, and the new WFS platform fueled by consumer trust in Walmart and Walmart logistics, enhanced by new third-party assortments. WFS gives a choice beyond Amazon to vendors and consumers. Walmart has worked hard over the past five years to climb the fashion scale, curating fashion brands both known and new to Walmart at excellent price points. Last but not least, Walmart.com’s inventory is easier to shop than Amazon’s bloated, redundant third-party inventory. This is great leverage for Walmart now and will be five years down the road in competing directly with Amazon. I believe Walmart may have found the sweet spot of beating or matching Amazon at its own game. This is the business case retail pundits will comment upon for years and universities will explore for decades.
I’m with you Cynthia. The stores being the ace in their hats. Once again I applaud Walmart, though it is a me-too move. My one concern is the demographic of the current Walmart shopper. How much do the partake of online shopping? I don’t know the answer but seems there is a lot to be lost if the shoppers using the service don’t increase enough to draw more and more third party sellers. And that’s my 2 cents.
While it may be important to move into this line of business, remember who you’re competing with – and who was there first. This is a “keep up” move, not something new. While it’s nice to be the first to do something, or the only one doing something, Walmart – and other major retailers – must stay in sync with the marketplace, regardless of being a leader or follower.
It is a huge change in mindset and a positive one for Walmart.com. They are moving from a retailer to a mall philosophy. The biggest challenge will be getting enough retailers to fill that “mall” where anyone can visit (on Walmart.com) and find anything they want.
Are they going to be one of two competing malls with 50 stores versus the one across the highway with 200 stores?
Walmart faces two customer challenges. This first is that in order to secure customers for WFS it must be seen as a viable alternative or at a minimum a supplement to Amazon. The second is that is must secure consumers. Failing to do either will mean WFS will be relegated to an also-ran.
What’s interesting about this is that part of Walmart’s angle has been the “American Made” niche. I wonder how certain politicians that have been big proponents of Walmart based on their sourcing strategy are going to feel about their new third-party selling business.
With that said, if Walmart has a decent enough vetting process for brands sold on the platform, it will be positioned to steal significant market share from Amazon––which has been called out for selling counterfeits and unsafe merchandise numerous times.
I’m excited to see where this development takes the brick-and-mortar heavyweight. I’d love to have a convenient option to replace my Prime memberships, as Amazon leaders begin to act more and more like Disney villains each day.
An edge over Amazon? No. of course not. The real issue is will it work? I don’t know. The whole point of a brand is that it stands for something, so bringing in third parties is always problematic; Walmart of course stands for low prices so the question is will the third parties continue with that theme or bring something else … and potentially confuse the message. IIRC Lord and Taylor was going to be involved in WM’s online platform and while I don’t know how that went — or even if it’s still extant — it never seemed to make much sense.
Smart move by Walmart and long overdue. They are the only retailer that can compete at the marketplace level with Amazon. Done right, Walmart will leverage its store footprint to out-Amazon Amazon’s delivery capabilities as part of this program. That could deliver greater value to shoppers and encourage them to rely on Walmart’s marketplace more so than Amazon’s. Hopefully, Walmart is investing in this approach and in its stores to increase its capabilities.
For Walmart it makes sense and has been a long time coming given their supply chain chops. For 3rd party sellers, I would imagine they will test it due to the lower cost structure driven by no monthly fees. It then becomes a numbers game. With Amazon, you pay more to be another needle in the seller haystack but can generate sales purely through the search volume that Amazon gets. With Walmart, it’s cheaper and there are far fewer suppliers, but you’ll get far less search volume. If the incremental sales are worthwhile at WFS, suppliers will stay.
With stores already closer to shoppers than Amazon’s fulfillment centers, the “physics” of this distribution model should provide Walmart with the advantage. Now the challenge becomes what items should be stocked to go through which stores to get the best blend of most needed items delivered in “acceptable” time to the customer. The transformation needed is a localized assortment “network” and treating the stores as a combination facility, brick and mortar, ship from, pick up in store, and flow through DC….