Walmart Lockers: Not As Dumb As They Seem

WMT puts Amazon's own playbook to use against it

   
Walmart Lockers: Not As Dumb As They Seem

Amazon (NASDAQ:AMZN) might be trying to run away with its lead in the e-commerce world, but Walmart (NYSE:WMT) isn’t going down without a fight.

If you count stealing Amazon’s strategy as a fight, that is.

Amazon, which did $61 billion in sales last year, recently debuted lockers, used to hold goods ordered online until a shopper wants to pick them up. Now, Walmart — which is on track to sell $9 billion, or around 15% of Amazon’s total, online this year — is trying the same thing.

My initial reaction: “What’s the point?” But after a closer look, I actually think the move is pretty darn savvy. Here’s why:

The Physical Presence

To start, let’s consider why Amazon got lockers in the first place: The company lacks a physical presence. Thus, lockers were a great solution to two common issues: high shipping costs and security problems (if you’re not home when a package isn’t delivered, for example).

Walmart’s story is different.

In articles describing the lockers, people toss out data that makes the concept sound silly. Neil Ashe, president and chief executive of Walmart Global eCommerce, said “No one else has 4,000 points of distribution within a stone’s throw of every customer.” Reuters noted that “Two-thirds of the U.S. population live within five miles of a Wal-Mart store.”

See, Walmart doesn’t just have a physical presence, but an enormous one. So, you can already sit at a computer, place an order, get an email or text when its ready, and then pick it up at your nearest (which is likely pretty near) Walmart store. So the lockers seem both insignificant and unnecessary … at first.

But then you remember: We’re lazy! Sure, your closest Walmart might be only five or 10 minutes away … but for some Americans, that’s still too far. And considering the huge size of Walmart stores — and the problems it has had squeezing its big-box format into the city in the past — dropping a few lockers to fill in the gaps seems like a great extension of one strong, in-place network.

Also, consider this anecdote: My mom hates shopping, and only focuses on getting the cheapest prices possible when she is forced to venture out. For her, the “experience” of a store or the act of browsing aren’t important at all. But despite the cheap prices, she finds the Walmart experience so unenjoyable — crowded, messy, long lines — that she still never shops there.

So … the lockers have another perk: They could appeal to customers who love bargains but hate the store itself — especially because of the company’s strong branding. After all, when people think Walmart, they think deals.

If the company can lure in the third of the population not next-door to a store, or make it a little more convenient for someone who doesn’t want to deal with in-store pick up … hey, why not?

The Move to Mobile

The addition of lockers can’t be looked at in a bubble. Instead, it’s part of a larger emphasis on mobile, which includes many other initiatives such as WMT’s in-store app. As Ashe put it, Walmart is trying to build “best-in-class e-commerce” with technology as innovative and sexy as Apple (NASDAQ:APPL).

Besides the fact that trying to be like Apple doesn’t always work out for retailers (just ask Ron Johnson), the emphasis on mobile seems a bit out of character for the discounter. The reality is that, even compared to fellow discount retailer Target (NYSE:TGT), Walmart’s customers have lower income levels — an average range of $30,000 to $60,000 per household, according to CBS.

Considering such an income bracket, are these folks active users, or even owners, of smartphones?

Well, as it turns out, age is actually a bigger influence of smartphone ownership than income. Plus, the smartphone penetration rate is up to 54% and growing. So building an appealing mobile experience makes perfect sense in the long-run because today’s smartphone users could become lifelong Walmart users if the company keeps things fresh … as it has been working to do.

Bottom Line

Of course, we do have to remember that the brick-and-mortar behemoth does more than $465 billion a year in sales, making it the largest store in the world. Thus, the company’s $9 billion in online sales isn’t just measly compared to Amazon’s … it’s less than 2% of its own total revenue.

It hardly seems likely that tossing a few lockers will do more than make a small ripple in a giant pond. But if e-commerce is indeed “the future,” Walmart is smart to move past the status quo.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/03/walmart-lockers-not-as-dumb-as-they-seem/.

©2014 InvestorPlace Media, LLC

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