Corporate Facts Product Development Technology Consulting Quality Analysis & Software Testing Mobility Cloud IT Staffing Market Research Lead Generation
in Operations - 01 Oct, 2015
by Brenda Martin - 12,728 comments
Wal-Mart Eyes Amazon in Potentially Costly E-Commerce Battle

If the world’s largest bricks-and-mortar retailer is serious about competing directly with Amazon, it may have to spend well beyond a previously announced investment target for its plan

Image Credit:http://www.inc.com/uploaded_files/image/970×450/getty_169961285_57266.jpg

(Reuters) – Wal-Mart Stores Inc said that it would take a different approach to online growth than Amazon.com Inc by using its large network of stores as distribution points.

But if the world’s largest bricks-and-mortar retailer is serious about competing more directly with Amazon–as it has suggested by testing a free shipping club–then it may have to spend well beyond a previously announced investment target on big distribution centers and other costs for its plan.

Wal-Mart’s sluggish quarterly results that were released on Tuesday highlighted the importance of growing its online business.

Online revenues grew 17 percent globally in the first quarter ended April 30, against a slight drop in overall sales. However, investments in e-commerce shaved 2 cents off the retailer’s earnings per share, equal to the cost impact in the quarter of its move to raise wages for entry level workers across the U.S.

Because of the high growth rates, most analysts see merit in investing aggressively in e-commerce. But as Wal-Mart prepares to test a free shipping program aimed at undercutting Amazon on price, the prospect of competing with a rival that spends heavily on investments has raised some concerns.

“They continue to try to grow e-commerce which is good because it is growing. But it comes at a cost,” said Brian Yarbrough, retail analyst at Edward Jones.

Wal-Mart has said it would invest $1.2 billion to $1.5 billion on e-commerce this year. It plans to open four large dedicated fulfillment centers–adding to 11 facilities in operation already, and the dozens of conventional distribution centers refitted to help in the online push.

But for Wal-Mart the biggest plus in its plan is a network of 4,500 stores. It already uses more than 80 for distribution, accounting for a fifth of its online deliveries on a unit basis. Wal-Mart booked $12 billion in online revenues last year.

“We feel like that’s a great advantage that we can leverage,” Wal-Mart Chief Financial Officer Charles Holley said on Tuesday, when asked about competition with Amazon. He said his response was not particular to Amazon.

Converting conventional distribution centers to handle e-commerce probably costs $20 million to $40 million dollars each, while building a large-scale fulfillment facility from scratch can cost $150 million, estimates Steven Osburn, director at Kurt Salmon specializing in supply chain.

Given that, any attempt to catch up with Amazon could run into the billions of dollars, Osburn said. “However, finding ways to use their existing infrastructure better is a much cheaper way to go about it.” Even then, Wal-Mart would likely need at least 5 to 10 more dedicated fulfillment centers, Osburn said: “You are still probably talking a billion dollars plus in investment if this catches on.”

Shipping costs are another concern. Forrester Research analyst Sucharita Mulpuru estimates Amazon could be losing $2 billion a year on shipments to members of its Prime program, which offers free shipping on most items for a $99 annual fee.

Wal-Mart’s pilot program is offering free shipping within three days for a fee of $50, half the cost of Prime.

While Mulpuru believes Wal-Mart would find it difficult to put a big dent in Amazon’s market share, she reckons it could make gains by capitalizing on its strengths, such as its strong relationships with packaged goods makers and in groceries.

David Cheesewright, head of Wal-Mart’s international division, pointed to the company’s strong position in online groceries in Britain as know-how that could be leveraged elsewhere.

“I think particularly in the area of grocery, where product knowledge, understanding of the fresh supply chain, operational excellence, is going to be a key part of being successful in that space,” Cheesewright said on the media call after the release of its earnings.


Share on FacebookShare on LinkedInShare on Google+Tweet about this on TwitterShare on StumbleUponPin on PinterestShare on YummlyShare on TumblrShare on VKShare on RedditPrint this pageFlattr the authorDigg this

Leave a Reply

  • Good info. Lucky me I recently found your blog by accident (stumbleupon).
    I have book-marked it for later!

  • funny cat videos youtube //21 Feb 2016

    Outstanding post but I was wondering if you could write
    a litte more on this topic? I’d be very thankful if you could elaborate a little bit more.
    Thank you!

  • vpn reviews //21 Feb 2016

    The most well-known ones are StrongVPN, Hidemyass, IAPS and VyprVPN.

    The approach to find a computer technician is through word of mouth.
    You’ll get 2 GB of free cupboard space that
    place use forever.

  • consommables de broderie //21 Feb 2016

    Fastidious respond in return of this matter with real arguments
    and explaining everything on the topic of that.

  • hotmail email sign in //21 Feb 2016

    You will add your friends' and family'
    s addresses and phone numbers, in addition to.
    Webmail is very popular among many individuals as it
    allows users to check their messages from any computer with an Internet

  • Greetings! Very helpful advice within this article!
    It’s the little changes that make the greatest changes.

    Thanks for sharing!

  • www.ezevent.com //22 Feb 2016

    %Most of the hype that we come across in the cosmetic industry is in the form of either collagen skin repair creams and lotions or in the form of collagen skin repair cosmetic and dermatological procedures.

  • attached storage //22 Feb 2016

    whoah this blog is magnificent i like studying your articles.
    Keep up the great work! You understand, lots
    of people are looking around for this information, you could aid them greatly.

  • Sweet blog! I found it while searching on Yahoo News.
    Do you have aany tips oon how to get listed in Yahoo News?
    I’ve been trying for a while but I never seem to get there!
    Appreciate it

  • CNC Laser //22 Feb 2016

    Howdy would you mind sharing which blog platform you’re working with?
    I’m looking to start my own blog in the near future but I’m having
    a hard time choosing between BlogEngine/Wordpress/B2evolution and Drupal.
    The reason I ask is because your design and style seems different then most blogs
    and I’m looking for something unique. P.S My apologies
    for getting off-topic but I had to ask!

  • format prints //22 Feb 2016

    I know this website provides quality based posts and other data, is
    there any other web site which gives these stuff in quality?

  • Elizabet //22 Feb 2016

    Different fighting units are given to each specie and they use different tactics for winning.
    Also a Tap4Fun game, released in 2014, which takes place
    in the ancient city of Sparta. Players rally an army ofdragons
    and wizards, and barbarians about them, develop clans, and make communities.

  • Ernestina //22 Feb 2016

    If you desire to take a great deal from this paragraph then you have to apply these strategies to
    your won website.

  • where can i buy flowers //22 Feb 2016

    Oh my goodness! Awesome article dude! Thanks, However I am having
    troubles with your RSS. I don’t know the reason why I cannot join it.
    Is there anyone else getting identical RSS issues?

    Anyone that knows the solution can you kindly respond? Thanks!!

  • Online Forex trading is one space of binary choices that’s extremely risky but haas the
    potential to maake savvy traders a lot of money if they get iin early.

  • alternative investments //22 Feb 2016

    I think that is one of the so much important info for me.
    And i’m satisfied studying your article. But should commentary on some common issues,
    The web site taste is perfect, the articles is in reality great : D.
    Good task, cheers

  • X700 Flashlight //22 Feb 2016

    Pretty! This was an incredibly wonderful article. Thanks for providing this info.

  • ipamorelin //22 Feb 2016

    ===> Area de marché.

  • Undeniably imagine that that you said. Your favorite reason appeared to be at the web the
    simplest thing to take into accout of. I say to you, I
    definitely get irked at the same time as other folks think about
    worries that they plainly don’t understand about.

    You controlled to hit the nail upon the top and also outlined out the entire thing without having side effect , other folks can take a signal.
    Will likely be back to get more. Thanks

  • mobile //22 Feb 2016

    What’s up to all, how is everything, I think every one is getting more from this web page, and your views are fastidious designed for new people.

  • Poppy //22 Feb 2016

    Not just will this increase your Neighborhood SEO
    however also offer better conversions from these directories as
    a result of the depend on aspects of local operation.

  • american express online //22 Feb 2016

    American Express partnered with Delta airlines to build the Sky – Miles program.
    Card members willing to repay an extra $35 more per year on the
    cost from the entry-level cards can earn approximately.

  • Most places request two types of identification, one using a picture.

  • Kimberley //22 Feb 2016

    I would argue that NHL ’95 is still the greatest game ever made.

    However, as he grew older he began to examine what he had got himself into.
    You should play these paid games with the same kind of
    strategy that most professional gamblers use to minimize losses and increase win chances and these include setting a budget,
    choosing your machines wisely and quitting while you are ahead.

  • If you want to become one of the best player on the earth and impress your
    mates, get the Mobile Strike Hack by HacksCommunity which requires no root or jailbreaking to your gadget.

  • Choline Supplement //22 Feb 2016

    whoah this weblog is great i like reading your articles. Keep
    up the great work! You know, many individuals are looking around for this information,
    you could help them greatly.

  • lose weight faster //22 Feb 2016

    I’ve been surfing online more than 2 hours today, yet
    I never found any interesting article like yours.
    It’s pretty worth enough for me. In my opinion, if all website
    owners and bloggers made good content as you did, the
    web will be much more useful than ever before.