Walmart Looks to Reduce Cost of Shipping



Image courtesy of Walmart.com

Online sales are expected to account for 8% of US retail sales in 2013, or $262 billion dollars. In response, more stores are looking to boost their e-commerce presence. As the online shopping trend grows more and more popular, companies are looking closer at their e-commerce departments for potential profitability. Although no one has been able to catch up to industry giant Amazon, Walmart is doing their best to reduce this gap by making some changes to their online presence. Walmart’s online sales are expected to total $9 billion in 2013, merely 2% of the company’s total sales revenue, which is why they have revamped their approach to e-commerce.

So how can Walmart bridge the gap between their online sales and their store location sales? One solution has been to allow customers to pick up their online purchase at their local store, either through their free Pick Up Today or Site to Store options. It is estimated that nearly two-thirds of all US consumers live within five miles of a Walmart store, and utilizing this shopping only benefits Walmart’s bottom-line. A typical Walmart online purchase ships for between $5 and $7, while Amazon’s average shipping costs are between $3 and $4. In order to reduce shipping costs to compete with Amazon, Walmart is allowing customers to choose whether they want to follow the traditional route and have their purchase ship to their homes, or pick up their purchases from a store location, but they also have the option to pay for their orders upon pick up, rather than paying with credit cards online. 

Along with allowing customers to pick up their orders from store locations, Walmart is also building e-commerce distribution centers around the country to reduce the cost of shipping. A main reason Amazon is able to keep such low shipping costs is because they have distribution facilities positioned around the country, allowing for orders to be shipping from a facility closest to where the customer lives. One of the reasons Walmart’s shipping costs are so high is that their distribution network is built to support retail store orders, not specific customer orders. By creating more distribution centers and also using existing retail stores themselves to package and send orders to nearby customers, they are hoping to attract more customers through reduced shipping times and costs.

 Cost of shipping can be a major deterrent for online shoppers, which is why free or discounted shipping is often a sales approach taken by online retailers. Walmart’s Home Free shipping policy allows for free shipping on orders over $45, but only on designated “Home Free” items (i.e. groceries, household items, pet food, etc.). They also offer 97 Cent Shipping, but again, this only applies to specified items. Walmart has the right idea by offering discounted shipping for online purchases, but by only allowing these policies to apply to certain items they are leaving out a large portion of online shoppers. Although Walmart is known for their low prices in their stores, online shopping is a different story, but with these new initiatives things might be looking up for this industry giant.