Walmart announced today that it will introduce its free NextDay Shipping service, starting in Phoenix and Las Vegas and expanding to reach 75% of the country by the end of 2019. One-day shipping will be available on baskets of $35 or more, and the retailer will use its existing fulfillment centers to source the items, starting with a “curated” assortment of 220,000 items on Walmart.com and localized to regional buying patterns.
The announcement is important for Walmart to stake its claim in the battle to drive immediacy, especially following Amazon’s mention a few weeks ago that free one-day shipping will eventually replace two-day shipping for Prime members. But in many ways, the availability of one-day shipping is well on its way toward the proverbial table stakes for shoppers (in fact, even though it’s not the title benefit of Prime just yet, Amazon already offers one-day and same-day shipping to Prime members on millions of items). As multiple fulfillment capabilities becomes a foundational piece of eCommerce, the critical differentiator for retailers will be differentiation: The latest examples to emerge–Drive Up at Target, for example, or van delivery and lockers at Home Depot—showcase the breadth of possibilities.
Among the other questions that arise for us: How will this contribute to, or continue to drag on, Walmart’s profits? How far will Walmart expand the assortment available for one-day? And will this eventually lead to Walmart building more fulfillment centers (currently it has six in its network) to fulfill more same-day shipping needs?
Regardless, diversity of fulfillment options means suppliers must continue to advance strategic assortment planning. As retailers across channels move away from the “endless aisle” and focus on optimizing assortment—i.e., boosting profits—on their various platforms, it is becoming critical for vendors to understand assortment not by retailer, but rather by fulfillment strategy and mode. What makes sense to have at the store shelf, vs. the fulfillment center, vs. available for click and collect? Simply put, what do shoppers need in one day, and are the right SKUs in the right place to meet that need?
In many ways, fulfillment speed is only the beginning of the story. The battle for convenience is only one part of the value positioning that will continue between Walmart, Amazon, and their other competitors. For Amazon, our focus is particularly on where the retailer ventures next in healthcare and physical retail. For Walmart, healthcare is a clear opportunity, but also in question is how the retailer will build on its momentum in online grocery to grow that business and maintain its long-term relevance—especially as Amazon potentially gets more aggressive in grocery itself.
For more of our insights on this rapidly evolving space, come back to KRiQ and join us at our channel- and marketplace-focused events—including next week’s Planning Conference in Chicago.
For more information, please contact:
Laura Kennedy, Vice President, Walmart US
Alice Fournier, Vice President, eCommerce & Omnichannel
Rachel Dalton, Director, eCommerce & Omnichannel