Supply chain optimization was turned on its head recently with Amazon's announcement that next-day shipping will be a complementary service to Prime members nationwide. The ambitious move, assuming the e-retail giant can deliver on its intentions, increases the pressure on other major retailers working to earn consumers' hard-earned dollar.
But Walmart, one of the world's most profitable companies and single-largest employer, says two can play at the one-day game.
As reported by Fortune magazine, Walmart turned to Twitter to inform followers that it, too, will make one-day shipping an option for online shoppers throughout the country.
"One-day free shipping … without a membership fee. Now THAT would be groundbreaking. Stay tuned," the Tweet stated, a not-so-subtle allusion to the fact that this service is only available to Amazon's Prime subscribers, who pay $119 per year.
"75% of online shoppers expect shipping to be free."
Traditionally, in order for customers to be eligible for free shipping, their merchandise must cost a pre-determined amount, usually a minimum of between $30 and $50. Consumers, however, are increasingly expecting not having to pay for package delivery, with 75% of respondents in a recent National Retail Federation survey indicating as much. That's up from 68% when a similar poll was conducted in 2018.
Over 140 fulfillment centers in US
In the early days of Amazon's founding, which traces back to 1994, 24-hour shipping was something of a pipe dream, largely because the company's warehouse was confined to the Pacific Northwest. Today, there are well over 140 fulfillment centers spread all throughout the U.S., giving the e-retailer the ground game it needs to reach customers in short order.
John Mercer, global head of research at Coresight Research, told Fortune via email that Walmart has as impressive a footprint as Amazon, so it possesses the geographical logistics needed to compete and then some.
"Amazon's biggest rivals … have the inherent advantage of thousands of pickup points in their store networks," Mercer explained.
Indeed, Walmart has roughly 156 distribution facilities in the U.S. Citing research from the consultancy firm A.T. Kearney, Sanford Bernstein analyst Brandon Fletcher said Walmart would likely need to build eight more facilities on top of what they already operate to make next-day shipping a reality, Bloomberg reported.
One-day shipping previously available in certain cities
Though virtually unheard of a decade ago, one-day shipping is not necessarily a new phenomenon. Alice Fournier, vice president of e-commerce at Kantar Consulting, told Retail Dive that Amazon has been providing the speedy service for a few years now but only in select locations.
"Now they've made an announcement out of it and a commitment to it - what they're going to do is make the investments that they already were making," Fournier added.
Neither Walmart nor Amazon have stated when one-day shipping will go live, but the latest in retail one-upmanship challenge will be an expensive one. During the earnings call when Amazon first announced the effort, CFO Brian Olsavsky said the company expects to spend $800 million to pull it off, USA Today reported.