Multichannel Logistics: Walmart.com’s Site-to-Store Strategy

Multichannel Logistics: Walmart.com’s Site-to-Store Strategy

At the end of every year, Walmart holds a meeting for the investment community. Because so much of Walmart's core strategy revolves around excellence in supply chain management, I always enjoy hearing about the company's plans. What interested me the most this year was Walmart's multichannel strategy.

The linked article details some of the key points..

• Amazon is the company's main target. Walmart.com, of course, is currently much smaller than Amazon, but it is growing faster. Walmart is trying to leverage its reputation for price leadership to take on Amazon. While the company doesn't have the vast selection of books that Amazon has, Walmart wants to be the price leader for bestsellers. Many prescription drugs are now offered for $4 and can be delivered to the home. Whereas Amazon attracts many price-insensitive convenience shoppers, Walmart is clearly targeting price-sensitive shoppers, and these shoppers pay close attention to shipping charges. Some of Walmart.com's products ship to the home at ridiculously low prices. For example, if you go to the Health & Beauty section of Walmart.com, you will find that it offers 97 cent shipping for many items.

• In taking on Amazon, Walmart has added more than a million products through a partner network. Because of this, Walmart offers a much larger variety of products online than what it offers in stores. Like at Amazon, shoppers can view the same product from different partners, read reviews on the reliability of that partner, and pick the partner that offers the best combination of price and reputation.

• It is Walmart's "Site to Store" strategy, however, that really differentiates the company from other online retailers. A customer can use the Site-to-Store service to have eligible products shipped for free to their local Walmart. For a customer that is already a regular Walmart shopper, this is a great convenience. In fact, a Walmart.com fact sheet claims that nearly 90 percent of its customers shop in Walmart stores at least once per month. The online site thus serves a dual purpose. Shoppers can also use the site to research products they might want to buy in the store. For example, Walmart added a tool that allows customers to set weight loss goals and then view the food products they shop for most frequently in stores and check product details, like ingredients and nutritional content.
Forty percent of Walmart.com sales are Site-to-Store purchases. To support Site-to-Store, Walmart is experimenting at a couple of store locations with a drive-thru pick up option. It is also making the store sections where online purchases are picked up larger and more prominent.

Site-to-Store is an impactful strategy for a couple of reasons. Multichannel purchasers are typically much more profitable than customers that just shop at the store. A presentation I received from Manhattan Associates (an ARC client) about its multichannel software solutions cited Nielsen Online data showing that the typical Walmart multi-channel shopper spent 38 percent more per year than Walmart offline shoppers in 2008. Presumably this is why Walmart is testing, rather than rolling out, the drive-thru option. The company wants to make sure that what it gains from an increase in online shoppers more than makes up for the smaller transaction sizes.

But what is most impactful in the Site-to-Store strategy is that it allows Walmart to utilize its existing network of 147 US distribution centers (DCs), 51 transportation offices, 7,200 tractors, 53,000 trailers, and 8,000 drivers. Last year, Walmart made two moves in its DC network: the company opened a DC to support food imports and it closed a Walmart.com DC!

Walmart also mentioned that it had implemented a new inventory management system. I wondered why until I started to think about its multichannel offerings. If you want to support Site-to-Store or be able to sell against network-wide inventory, you would need a unified inventory management system.
Walmart competes on low prices and its multichannel tactics reflect this strategy. The company's website makes it clear that online prices do not always match store prices, and prices may also vary between stores. This is widely considered a multichannel mistake, but one can see the logic of this for a low-cost provider like Walmart. Further, I can't find a phone support option at Walmart.com.

Apparently, all ordering problems must be addressed by email.

Walmart clearly wants to use its size and scale to compete more effectively. Leveraging its existing logistics network to support Site-to-Store is just one example.

WMS Architecture and Total Cost of Ownership

WMS Architecture and Total Cost of Ownership

Steve Banker of ARC has written a new article on WMS configurability or Business Process Modelling & configurablity. Its a good read idf your looking to install an configurable , flexible WMS