Source: Walmart
Walmart’s two-day shipping pledge comes with a caveat
Some Walmart.com shoppers are finding items listed online are “out of stock” — even when they’re in stock. The messages are arriving after the discounter determines those customers’ homes are too far away to profitability ship the item.
Previously, all items would be shipped when ordered, regardless of distance or shipping cost. A Walmart spokesperson told The Wall Street Journal that the new tactic aims to increase ground shipments from nearby warehouses and rely less on shipping by air to meet its two-day guarantee. Walmart also hopes to reduce split shipments, or online orders arriving in separate shipments from different warehouses.
Customers receiving “out of stock” messages are given suggestions for similar items available at closer warehouses.
The change, announced in August, has led to sales declines on certain products on walmart.com, motivating affected vendors to stock products at more Walmart warehouses around the U.S. to avoid losing a sale due to costly shipping.
The system is one used by Jet.com, acquired by Walmart in 2016. Under Jet.com’s algorithms, the closer the online shopper is to available inventory, the lower the cost. Online shoppers on Jet.com are also incentivized to purchase more items in a single order and opt out of free returns with the promise of bigger savings.
With Prime, Amazon.com has a qualifier that states its two-day promise starts “when the item ships” — not when ordered — and delivery may run past two days if the item is out of stock or unavailable to ship immediately. Under Amazon’s “Ship by Region” program, some items being sent by third-party sellers may not qualify for Prime’s guarantee because the seller has decided it’s too costly to meet the two-day window.
Retailers are encouraging their customers to use BOPIS and locker pick-ups as a way to combat rising expectations around speedy shipping. According to a survey earlier this year from AlixPartners, the maximum amount of time considered acceptable to wait for a package is an average of 4.1 days, down from 5.5 days six years ago. Amazon Prime members, on average, expect packages to arrive nearly a day earlier than non-members.
- Why Walmart Shoppers are Finding More Items ‘Out of Stock’ – The Wall Street Journal
- How are Shipping & Delivery Dates Calculated? – Amazon.com
- In New Amazon Prime Program, Not All Goods Arrive in Two Days – The Wall Street Journal
- Top trend in shipping? More consumers want fast and free – AlixPartners
Discussion Questions
DISCUSSION QUESTIONS: What do you think of Walmart’s move to declare an item “out of stock” if delivery costs are too high? Which steps being taken by retailers to reduce shipping costs — suggesting alternative items, offering incentives for bundling, BOPIS, etc. — do you think offer the best opportunities to keep customers happy?
Poll
BrainTrust
Nikki Baird
VP of Strategy, Aptos
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Simply declaring “out of stock” sends all kinds of wrong messages. If “out of stock” appears regularly, customers will lose confidence in Walmart, or the vendor or both. Amazon has been varying shipping timeframes for years using different strategies and labels. Prime gets different treatment but if Amazon can’t execute profitable shipment from third parties, a LOT of those items do not have Prime status and free two-day shipping. Walmart needs to start doing something similar in terms of declaring what is eligible shipping and when it can arrive. Long term, transparency is the best policy. Give customers variable shipping rates based on distance and speed, and then let them decide.
It would seem that the game of who can get it delivered the fastest and the cheapest has run into severe issues. Does it really matter how fast? I never thought so, but the cost of shipping does. So here we see retailers struggling to make the numbers work and lying about it which is not good. Always tell the customer the truth and give the customer the option. If the item is expensive to ship, let the customer know the issue and offer them the opportunity to pay the difference perhaps with an incentive like a coupon a percentage off of their next purchase. However the best option would be providing an incentive of no charge or even possibly a discount if they pick it up in the store.
Honesty is always the best policy. Moreover, everyone knows that when the customer comes into the store to pick up the item it’s also an opportunity for them to make an additional purchase.
These types of initiatives are necessary to make e-commerce economically sustainable. The keys to success are offering shoppers transparency and meaningful choices.
I actually see no problem with this since Walmart is assuming the risk that a shopper could jump off to another platform when items aren’t available. No doubt Walmart is gathering data that will determine whether its similar-item recommendations actually work in enough cases to justify the strategy. In the meantime, Walmart is shifting the burden to suppliers to ensure that products are widely distributed.
This is a contradiction in logic for Walmart. They are buying up brands like Bonobos and making “partnership” agreements to expand their reach and then blocking other customers from ordering due to shipping costs. To grow sales and compete effectively against nemesis number one, something has to give.
This approach clearly is the bean counters overruling those tasked with customer experience. Rather than taking the long view to grow volume, build the base, and stop market erosion, they are looking at short-term profitability. If the industry banded together and everyone did the same, it would be totally sensible. Instead, even though Amazon has a caveat of its own (which most people are not aware of) Walmart is likely shooting itself in the foot trying to educate customers (indirectly) to the cost of expedited shipping. Effectively, Walmart is encouraging thwarted customers to go back to Amazon and others where they don’t experience this problem.
It’s wrong, its bad customer service and it won’t help Walmart secure customer trust or compete successfully with Amazon. Certainly adjust shipping fees to cover costs, but be upfront and transparent about it!
Walmart is certainly entitled to manage its costs, and shipping is definitely a sore point for all retailers. But I’m not sure this is the way to go. Retailers should always be honest with customers.”Out of stock” — if this is the actual wording used — is not really the truth. “Ineligible for 2-day shipping” would be more accurate. From the customer’s point of view, I think there have been enough studies that have shown that consumers perceive things as out of stock (as in, unavailable to them) whether they are out of stock or whether the item is simply unavailable to them. So it’s not worth lying to customers about stock levels if the objective is to prevent them from thinking the retailer (whether Walmart or a third-party seller) is too cheap to stock the inventory close enough to actually be eligible for the two-day ship. I mean, not everything on Amazon is eligible for Prime, and they’re pretty up-front about it without saying that it’s out of stock (when it’s not).
And if Walmart were more transparent, they might have the opportunity for a win-win — by telling the customer, this isn’t eligible for two-day shipping, but if you paid $X in shipping, we could get it to you by Y date — and actually collect some money for shipping while they’re at it. Or get the same result they’re getting anyway today, which is no sale.
“Ineligible” … perfect. I thought the Prime membership fee was supposed to be an upfront payment for the many pesky shipping charges encountered over the course of the year. In my household, that fee gets a better return than any other investment. Why did Walmart decide to be so obtuse? Head scratcher….
In an age where trust and transparency are so critical, retailers should be wary about making such moves. Declaring an item out of stock when the shipping costs get too high is not an appropriate way to handle things. This is easily solved by Walmart setting up shipping tiers and timeframes for each item. Those items that qualify for the two-day shipping should clearly be identified. Similar to Amazon’s Prime shipping strategies, Walmart should offer flexible options including longer shipping times, standard shipping and priority shipping.
Achieving consumer confidence is challenging as it is, and it’s a delicate balance to get right. Be upfront and honest with your consumers, empower them and let them best decide the best shipping option, including BOPIS and lockers if they so wish to use them.
The practice is deceitful and can erode consumer confidence in Walmart. Better to be transparent and honest. If you are farther, you pay more. It’s the reality of the fulfillment business and there should be no free lunch. Shipping time should be from time of order because it’s the only constant in the equation; I always know when I ordered it.
You either have two-day shipping or you do not.
This is not exactly good customer service nor is it a promise. I think Walmart needs to think long and hard about what their e-commerce strategy is. Just because Jet did it, does not make it right or good. Jet was no screaming success. They were successful at raising capital and selling to Walmart. The operating results were fairly poor.
I think the customer is going to reject Walmart because of issues like this.
I’m confused as to why Walmart needs an “out of stock” message when this is not actually the case. Are they tricking to trick consumers? Or do they not trust that understand what “outside of delivery zone” means? Very odd. This is a major threat to consumer trust, and customers will start to look elsewhere if promises aren’t met, if they’re not doing so already.
This lack of transparency with the shopper is a big mistake. Once the shopper starts to lose faith in Walmart, Amazon awaits with open arms. The price of Prime is small when applied against disappointment and lack of faith in another retailer.
Sometimes you just have to sit back and say, what are they thinking?
Yes, they have to manage their costs. Make it clear that it’s a limited two-day item. It’s not about this sale, it’s about the next time.
The economic reality of online has finally landed, although perhaps with the wrong wording. Perhaps when the logistics of ship-from-store (and refill-store-from-fulfillment center) get economically sorted out, there will be less need for this kind of workaround. And for those who don’t live close enough to a Walmart store and are too expensive to ship to … reserve it in store and make it a special trip to come pick up. It has to happen sooner or later.
Frankly it is bad customer service. Lying to build the sale to make it profitable to deliver is going to hurt Walmart in both the long and short run. What has happened to simply being honest?
I don’t think declaring “out of stock” is the right messaging at all but ultimately we all knew the time would come when profitability was going to beat out the ever greater expectations of customers and delivery time. The algorithms that Jet.com created was one of the primary reasons for the acquisition so it’s good to see Walmart leveraging them. It is the right move definitely — I just think they should position it differently.
Calling products “out of stock” when they aren’t seems a bit disingenuous. A promise is a promise to shoppers, not just when it is convenient. This type of policy — while totally within retailer’s rights based on the stated terms and conditions — will erode shopper trust when it happens. Shoppers should be given the options upfront rather than on the back end.
I wonder how far you can go by lying to customers and later trying to renew that relationship. Your best bet is to be honest and tell them what it will take to get their desired product with explanations. Lying to them is a fool’s game.
Overall price to the customer is defining this move more than anything else — and it’s no better than an “out of stock.” I’m sure the Walmart folks have assessed whether an “out of stock” message is better than a 120 percent overall price increase. For Walmart, profitability remains the business, and even the best supply chains are not going to remove all costs. The alternative items suggestions at nearer warehouses is a nice touch. I’d be curious to know what the real volume of these “out of stocks” actually are and to what degree this might really hurt their business. However, given that 90 percent of customers are within 10 miles of a Walmart, I suspect it’s not overwhelming. Actual cost savings from flying an item out to remote locations can be significant. The fact is that they’re letting the customer know up front and they’re not charging exorbitant delivery fees to meet an arbitrary two-day promise. Maybe changing the wording a bit for better transparency can help — but it’s still very customer-focused.
This is an interesting concept. It lacks of transparency. If the customer finds out the item was in stock for the friend who lives closed to the warehouse, how is that customer going to feel? (Lied to.) And how many “out of stock” messages before the customer abandons Walmart and opts for another retailer? (Perhaps Amazon.)
The management of shipping windows and costs is critical for getting e-commerce and omnichannel experiences right. Fudging and fibbing and ultimately eroding trust is counter to the end goal. Walmart has been so much smarter than this lately. This is antiquated thinking. They are better than this now.
This is ridiculous. I can’t be reading it right.
Be careful Walmart. You will chase those customers to Amazon!
“Out of stock” are the three worst words in retail. To leverage a shipping promise by falsely declaring an item as out of stock, because profits are not sufficient, is heresy. This borders on bait and switch. Walmart needs to examine its commitment to its customer base if it continues to follow this example of a two-day shipping pledge that uses this caveat. This is a poor policy that Sam Walton would certainly not have embraced, and I am concerned as a consumer about what Walmart is doing as a retailer just to compete with Amazon.
While Walmart has made some tremendous strides recently in its battle to compete with Amazon, this move raises some real ethical questions. In essence, Walmart appears to making a promise to its customers that it is unwilling to keep. Plus, lying to customers is never a good idea in the short or long run. Mr. Sam would not be happy with these actions.
Calling it “Out of Stock” is simply lying to the customer. I see Walmart inherited this dishonesty from Jet.com.
Declaring the items “out of stock” when they aren’t feels dishonest. Instead, Walmart should direct customers to in-store pick-up, or give them the option to wait longer for delivery.
Marking items “out-of-stock” seems to take the “either we do it perfectly or we don’t do it at all” approach, which I can’t imagine will be good for sales.
Once again, we see the supply chain is central and core to the success or otherwise of retailers both online and at store. It is interesting that customer expectation is more than four days for delivery, but retailers are promising two days, and if they cannot deliver that promise they “out of stock” to contain costs. Why not just deliver to the customer expectation and give them what they want? The “out of stock” policy must detract from customer satisfaction and eventually lead to a loss of business, particularly if competitors can deliver in full, even if slower.
The game is changing as retailers find that their marketing message is becoming unprofitable or undeliverable, customers will vote with their feet if they constantly get shorted on items they ordered. Getting the right stock in the right geographic locations to profitably deliver in full is central to the offering and the optimization of the supply chain. As online retail matures, this is going to become the same battle ground as it has been for some time in traditional retail. Is the tail wagging the dog as in marketing people setting the impossible agenda finally beginning to change?
Dear Walmart,
If you offer a two-day shipping pledge, you have a duty to honor it. Plain and simple.
When you tell me the item I have ordered is “out of stock” when it is not, yet this is how you deal with not wanting to ship the item to me in two days, then you have broken my trust. Breaking the trust of your customers is not a good strategy.
If I order and item and you realize the cost of two-day shipping is too high, then please let me know what other shipping options I have. Give me the choice, and in return you keep my trust.
Sincerely,
Your Customer
Sounds almost like they made a programming shortcut instead of investing in proper user interface design. Certainly understand if the product is too far to ship profitably and Walmart has every right not to take the order. However, it would be a lot better to put out more prompts indicating that the item is not available in the closest location and give the customer option to wait longer or order alternatives.
Doug McMillon ought to change the language before the sun sets tomorrow. The item is not, in fact, “out of stock.” It is available (i.e. in stock) if you are close enough to the fulfillment location; not available if you are too far away.
It’s a bad practice to teach your employees that it is somehow ok to lie (strong word, however that is what it is) for economic reasons.
Using the phrase “out of stock” doesn’t feel like the best strategy for Walmart. An out of stock item should be OOS, not one that is too far away to be delivered in a two-day window. This is especially true when looking at what Amazon does with its shipping, and how non-Prime items are clearly marked and that expectation is set with the customer before ordering. Walmart needs to clarify its messaging as consumers want clear, concise information. They could easily be confused with Walmart’s current approach.
I would be curious to see how you validated this claim and if it has more to do with the item and vendor vs cost of shipping. As a third-party vendor of Walmart, we may have an item that is sold by many other vendors but do not offer free 2nd day shipping — the cost would reduce all profit on an item. This is similar to Amazon where certain sizes may be eligible for Prime because Amazon stocks it, but we may be the only vendor who has large but only offer Standard or Priority shipping. But if you want to know what Walmart is doing, just look at Amazon 10 years ago and assume copied services, late planning and worse integration.
I am duly impressed with the heavies responding to this discussion. There is no incentive tool in use that will ever remove the upset a customer feels upon receiving any type of rejection when trying to make a purchase online. To focus merely on the shipping and delivery aspect is to find fault rather than solution, although to hide behind a false “out-of-stock” posting as a remedy shows that Walmart could certainly utilize the brilliant and qualified views of the contributors to this post.
Most definitely, the multiple-choice shipping option in my view, will alleviate this stress factor altogether. One factor I haven’t seen in the discussion is that WM offers free shipping which puts the stress in their court and opens them up for CS problems coming out of the gate. They also use FedEx which is understandable but unfortunate.
I believe-in free checking and free shipping also, but the deck holder is there to win and the heaping upon oneself of a growing unsatisfied client database is a direct sign of poor managerial decision making. Where possible, “free” is the obvious E-ticket, but in the end, is it not the responsibility of the buyer to pay for the gas or to decide how to to get over to Walmart to buy something?
Likewise, online, they will welcome the customer choice position you put them in when you show items to be perhaps a bit out of their reach and to let them make their own decision on it as opposed to the cat which is already “out of the bag” on this getting-back to them and crushing their trust? Business Rule #1, “never count the customer’s money.”