The Wall Street Journal is reporting on Wal-Mart building up an infrastructure to compete directly with fast delivery via Amazon Prime:
Wal-Mart Stores Inc. is testing a two-day shipping subscription service and building a regional delivery network, in the boldest attempt yet by a major traditional retailer to compete head-on with Amazon Prime.
As part of the project, Wal-Mart, the world’s biggest retailer, will shift more inventory to eight massive e-commerce warehouses around the U.S., the last of which will be built by year’s end. It is part of a $2 billion investment the company is making in technology and logistics to boost e-commerce sales.
Interestingly this will put even more pressure on FedEx:
Wal-Mart will tap regional carriers to deliver more of its packages, according to people familiar with the project. But it will also use its 6,000 tractor-trailers, one of the largest private trucking fleets in the country, along with its 4,600 U.S. stores, to take on what has become one of its biggest rivals.
That could make Wal-Mart less reliant on FedEx Corp. , which handles the bulk of Wal-Mart’s parcels.
The most interesting aspect though is that while Wal-Mart is going to start with free two-day shipping -same as old fashioned Amazon Prime-, Amazon is already experimenting at the next stage and is slowly rolling out Prime Now, which is promising free 2-hour delivery. The difference of where both companies are at in the U.S. with regards to processes and infrastructure couldn’t be more obvious.
More than anything, this new, serious e-commerce initiative by the retail giant shows how much catch-up Wal-Mart will have to do. And we are not even talking about the small but important fact that Amazon Prime is a far more diverse bouquet than just free fast shipping for a yearly fee.
None the less, how Wal-Mart’s ShippingPass will fare in the long term against Amazon Prime will be very informative to the industry as a whole.
Can a retail giant make a dent in Amazon Prime just with sheer scale coming from traditional retail or is the moat around Prime in a mature market such as the U.S. too big by now?
I wouldn’t bet my money against Amazon Prime in this specific fight, but we will see.
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- Compare what can kind of products can be put inside a bundle called “ShippingPass” to what can be put inside a bundle called “Prime”. The naming alone reveals how little strategic value Wal-Mart seems to be putting behind the notion of making a bundle going across multiple categories; you know, like Amazon Prime, the one they wan to fight head-on with this. (Even with comparable shipping times, item prices and user experience -all big ifs-, a smaller fee will almost certainly not be enough against an established Amazon Prime. Amazon’s growing library of exklusive Prime Video content alone will see to that. That’s called asymmetric competition, by the way.) ↩