Source: Walmart
Will an in-store pickup discount give Walmart an edge over Amazon?
Marc Lore, head of Walmart’s e-commerce operations in the U.S., says that one of the things he loves about his employer is its “maniacal focus” on its customers and the way it goes about “finding ways to offer them low prices — every day.” The most recent evidence, according to a company blog post written by Mr. Lore, is “Pickup Discount,” a new program that gives customers a price break for ordering select items online at Walmart.com and picking them up in one of the chain’s 4,700 stores.
The new discount, going into effect on April 19, will initially be available on 10,000 items. By the end of June, more than one million items will be eligible. Discounts are expected to range between three and five percent of regular prices depending on the item.
Walmart offered examples of the deals consumers will get with its pickup discount, such as the LEGO City Great Vehicles Ferry, 60119, which will cost $23.99 when delivered and $21.44 when picked up.
“We’re creating price transparency to empower customers to shop smarter and choose what’s best for them. Now, they can either pick up and save even more money, or ship two-day for free to home, without paying for a membership,” wrote Mr. Lore.
Mr. Lore said Walmart can offer the discount because it cuts costs by delivering products directly from fulfillment centers to stores. The program is part of a broader effort by the company to make it more convenient and less expensive for customers to shop.
Discussion Questions
DISCUSSION QUESTIONS: How effective will Walmart’s Pickup Discount program be in shifting online purchases from home delivery to in-store pickup? Will the discount help give Walmart the edge it has been looking for over Amazon.com? How do you think Amazon will respond?
Poll
BrainTrust
Phil Masiello
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
Tom Redd
Global Vice President, Strategic Communications, SAP Global Retail Business Unit
It’s a smart move by Walmart to leverage their brick-and-mortar advantage. Marc Lore and team have rightly targeted the high cost of shipping and turned it into an opportunity for their stores. While some customers will still want home delivery, many Walmart shoppers will appreciate the additional discounts. Furthermore the in-store pickup activity will create additional in-store sales opportunities beyond the initial online order. While I don’t believe this is a significant edge over Amazon, it is a great example of leveraging a strength.
For some time now retailers have been trying to turn stores into experience centers and points of fulfillment. This is a step in the right direction by Walmart. However, we should all expect Amazon to roll out stores once they find the right model.
Brilliant idea as long as Walmart uses the discounting tactic sparingly. What I like about it is that this brings attention to the shopper, to encourage them to buy online and pickup in store. Although reports indicate that 30 percent to 50 percent of shoppers have tried click and collect, it is still not the norm.
They need to focus the shopper on coming in-store to pick up from their locker, to encourage some of that add-on purchase.
The downside is that discounting can become addictive. Too often I saw my fellow category managers with a portfolio of products either on constant promotion (discount), or at times having the entire portfolio on promotion. Once hooked …
It all comes down to the value a customer places on time. The effectiveness of the program will hinge on the amount of time customers will have to wait in-store to pick up their orders and how distant they are from the nearest store. If consumers have to wait more than a minute or two, or don’t live close to a Walmart store, they will opt for home delivery. This means that customers in many large metropolitan areas will only be served through delivery.
One of the parameters that will definitely impact the customer’s decision is the ease of the store pickup process. This includes getting to and from the store, the ease of parking, the weather, the actual in-store pickup process, etc. If it is a hassle, customers will quickly find that the three to five percent savings isn’t worth it. Bottom line, the three to five percent savings is not likely to have a large impact on shifting customers from using Amazon to Walmart.
This is a clever method to get shoppers to come into the store. Years ago Judy Bell, Target’s visual merchandising guru, put forth the following formula: “If my guest enjoys her shopping experience in my store, she will stay longer. If she stays longer, she will purchase more items.” If a shopper picks up their purchase in the store, she may stay a bit longer and purchase more items. The savings in delivery fees can then be passed along to the shopper. It’s a mathematical win-win. This is another validation of the fiscal power of the physical store — and Walmart has 4,700 more of those than Amazon.
Very smart move by a real and smart retailer. I consider Amazon a distribution warehouse with an interface funded by its cloud services. Walmart is a real retailer and makes moves like this that are truly for the shopper. Make Walt proud, Marc and team.
The beauty of e-commerce is the convenience of having the product delivered to your door. Amazon is on a quest to make that as fast as possible. In some urban areas, Amazon delivers the same day as the order is placed.
Asking customers to place an online order then drive to the store to go inside and pick it up is not necessarily convenient. Will some customers take advantage of it? Certainly.
But the real winner will be Amazon building small “stores”, which are really mini-fulfillment centers, to deliver to the customer faster.
I have the greatest respect for WalMart’s ability to drive costs out of the extended supply chain to get the lowest cost to the consumer. They truly do have a maniacal focus on this. But I have even more respect for Amazon’s maniacal focus on customer convenience and simplicity to remove as many friction points from the order and delivery process as possible in e-commerce.
Amazon has something that will take years for anyone else to accomplish. They have built loyalty and trust with the consumer.
I think the discount may be mildly effective in shifting purchases to in-store pickup for customers who already shop at Walmart. However, Amazon has never been afraid to lower prices to gain or maintain market control, so I expect they will match Walmart’s discounts. Overall, I don’t think this move alone will draw a significant amount of shoppers from Amazon to Walmart.
This latest move by Walmart builds on the company’s strengths: 4,700 stores and extreme efficiencies in their logistics system. The Pickup Discount program gives one more incentive for the Walmart customer to combine the convenience of online shopping with planned trips to a Walmart store and saving money. The company is making the right moves as it pursues a new value formula that will resonate with its customers.
Walmart is figuring out how to turn their stores from what pundits have called a liability into a point of differentiation. The company needs to put equal effort into ensuring that the in-store experience does not take away from realizing that potential.
Amazon’s actions over the past couple of years all point to anticipating the battle with Walmart over consumers to include physical presence and providing more choices. How well Amazon and Walmart execute against their distinct strategies will determine success.
This is another way to compete with Amazon — or any other online retailer who sells similar merchandise as Walmart. For the extremely price-conscious, the in-store pickup discount will be welcomed. That is where this may give Walmart a competitive advantage. However, there is a level of convenience that is sacrificed. Even though most of the population (in the U.S.) lives within 10 miles of a Walmart, will a customer be willing take the time, make the drive, deal with traffic, etc., to save a dollar or two? The answer is yes for some. Others will continue to buy online as the way they always have. From home or work, enjoying the convenience of having their merchandise brought to them.
It is always a good idea when your plan involves getting more customers into the store. This is one of the benefits of Walmart’s new plan. Will it give them an edge over Amazon? I doubt it. But it does give them the opportunity to have added impulse sales which Amazon can’t do. My bigger question is, how many Walmart customers will actually be taking advantage of the discount by buying online?
Another alternative to the final-mile issue. The Walmart pickup discount program drives customers to the store with the opportunity for incremental/impulse higher-margin items. To this end this alternative takes advantage of Amazon’s current lack of brick-and-mortar alternatives. The key will be the ease of in-store pickup at Walmart. Discount or otherwise, this will be the Achilles’ heel for Walmart.
Amazon will probably test something similar to Walmart’s pickup discounts in the stores it develops. Also, I envision Amazon offering something comparable to other large specialty retailers, e.g., Home Depot, Lowe’s, etc.
As some of my peers have touched on, the success of Walmart’s Pickup Discount program will rely heavily on how well it is executed. Today’s digital world has created shoppers who are accustomed to speed and convenience — two things that are inherent in home deliveries. Nothing can beat the convenience of having a purchased product delivered right to your doorstep.
The one consideration of online shopping delivery systems is the cost. Shipping costs can be expensive, adding to the overall price of a product, and have the ability to deter online shoppers — especially if there is a better, more economical option. Walmart’s Pickup Discount program could be that better option since it cuts the shipping cost. However, to truly surpass home deliveries, the program must operate seamlessly and make the price cut worthwhile, factoring in the time it takes a shopper to get to the store. If Walmart can create a system without order errors, delays in fulfillment and crowded pickup areas, it stands to give Amazon.com a run for its money.
I think this is a massive shot across the bow of Amazon. We already know that Walmart shoppers are more likely to go in-store pickup to avoid shipping charges (although this is now mitigated with WMT’s free shipping over $35.) But the research I have showed 55% of WMT shoppers prefer BOPUS, meaning if now they get another incentive (lower prices), I can only imagine they will increase their share of wallet.
The rationale that they have lower costs because they ship in pallets to stores doesn’t really fly with me — it will still be a challenge to get the right inventory to the right place to help make sure people can actually pick up the product they ordered. Figuring out how to forecast demand for pick-up-in-store on top of the usual in-store sales will be a huge challenge.
Walmart has this network of brick-and-mortar stores, so it absolutely makes sense that they would make as much use of them as possible. The fact that customers also feel rewarded through discounts for coming into those spaces creates a positive mental connection. Plus, once they’re through the door they can may end up buying more.
There’s also a convenience angle here — for some shoppers it’s more convenient to be able to pick up their items and know exactly when they will have them in their hands the same day, as opposed to waiting around for and/or missing home deliveries. If the pick-up experience is good, simple and straightforward, and they live near a store, then the combination of factors may be enough to make them choose Walmart over e-commerce companies.
Offering a discount on in-store pick-up of products is a smart strategy for Walmart. They are passing on the cost savings of reduced shipping costs to consumers who choose to pick-up their online orders in the store. This also should drive incremental revenues for Walmart, as consumers will likely do additional shopping in the store when they come to pick up their merchandise.
Providing consumers with flexible and convenience choices for buying and receiving goods is good strategy and it gives consumers more compelling reasons to choose a retail brand instead of Amazon. Every little bit helps!
If it looks like a discount, walks like a discount, and talks like a discount, it will drive customers into the Walmart stores. The customer won’t stop and calculate how much they’re saving (or losing) by driving to the Walmart store to make the pick up. When there, they will buy more products from the greater selection at great prices that Amazon can’t match. A win for Walmart, which seems to be doing a good job of countering Amazon’s maneuvers — on and offline — a very challenging task these days that other retailers wish they could do, too.
There are very few things that have survived the downsizing we are becoming so used to in the 21st century greater depression. Grocery stores are one of those few. But not for the sake of size or peer selection. The big box supermarkets are creating little ethnic specialty sections geared to the area populations and it must be paying off because the sections are growing in size and diversity. It is for that reason I fear that Amazon may miss out on the upsurge in demand for same day grocery BOPIS. Small stores may not be a safe bet in this case.
Getting and keeping market share is the key in grocery’s evolutionary present day situation. Walmart is using the distribution, vendors and stores they have to explore and exploit this market’ s receptiveness to support discount same day pick up and perhaps delivery. This amount of control combined with minimal financial risk will be difficult to challenge for the e-commerce only newbie.