Thursday, February 2, 2017

Walmart Offers 2-Day Free Shipping

Walmart is raising the stake in e-commerce in a move to undercut its rivals, especially Amazon Prime.

Last 31 January, Walmart announced a new initiative that will see 2 million frequently ordered things like baby products, cleaning supplies, and some food items enjoy two-day free shipping. And unlike Amazon Prime or Walmart’s previous "Shipping Pass" program, there is no membership fee to enjoy this perk.

Marc Lore, former head of and now head of Walmart’s e-commerce operations after Walmart purchased Jet for US$ 3 billion last year, said on a conference call that, "In today’s world of e-commerce, two-day free shipping is table stakes. It no longer makes sense to charge for it," according to Reuters.

And in this, Lore is saying that if you want to be a real player in online shopping, you need to offer free two-day shipping. Anything less is simply unacceptable to customers.

Of course, if you're a consumer, this is great news: the things you need to buy all the time are going to continue getting cheaper and easier to buy.

And while the easy read on this announcement is that Walmart is moving into Amazon Prime's territory, what it really does is highlight just how differently Walmart and Amazon are approaching their retail businesses.

Walmart has been and remains a retailer first. The company's success was built on scale — offering more products in one place at lower prices than any competitor could offer.

Certainly Amazon’s initial and continued foray into retailing is, like Walmart, predicated on scale. But with the internet’s customer acquisition cost bordering on zero, Amazon hasn’t been able to leverage its scale to achieve the same profit ends as that Walmart has. (Amazon’s stated aim, however, isn’t profit but free cash flow it can reinvest back into the business.)

Amazon, while breaking into the mainstream as a retailer, has now become a significantly more diversified business. In its most recent quarter, Amazon reported a profit of US$ 252 million (on US$ 22.3 billion in sales), more than all of which came from its web services business (US$ 861 million).

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