by Alyssa Oursler | March 27, 2013 1:17 pm
Amazon (NASDAQ:AMZN[1]) might be trying to run away with its lead in the e-commerce world, but Walmart (NYSE:WMT[2]) isn’t going down without a fight.
If you count stealing Amazon’s strategy[3] as a fight, that is.
Amazon, which did $61 billion in sales last year, recently debuted lockers[4], 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:
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[5] of Walmart Global eCommerce, said “No one else has 4,000 points of distribution within a stone’s throw of every customer.” Reuters noted[6] 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[7], 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[8] 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[9] 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 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[10]).
Besides the fact that trying to be like Apple doesn’t always work out for retailers (just ask Ron Johnson[11]), 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[12]), Walmart’s customers have lower income levels — an average range of $30,000 to $60,000 per household[13], 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[14] 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.
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.
Source URL: https://investorplace.com/2013/03/walmart-lockers-not-as-dumb-as-they-seem/
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