Wal-Mart Tests Ship-to-FedEx Option
Wal-Mart Stores has achieved some success by giving consumers the option
to order products online and then pick them up at one of its stores. But what
happens when the retailer has very few or no stores in an area? Wal-Mart apparently
has an answer for that also, and it’s FedEx.
The
retailer began testing its Site-to-Store Shipping with FedEx service this summer
in Boston and Los Angeles. The service enables shoppers to order online and
pick up items for free at their local FedEx office. Wal-Mart doesn’t have any
stores in Boston and only two in L.A.
“Customer response thus far has been quite positive, and our business
team recognizes we have a winning formula,” Ravi Jariwala, a spokesperson
for Wal-Mart, told The Wall Street Journal.
“We fully expect other large retailers to take advantage of this,” Randy
Scarborough, vice president of marketing for FedEx Office, told the Journal.
“We
are planning our physical network to accommodate this because we do anticipate
additional demand.”
Discussion Questions: Does Wal-Mart have a winner with Site-to-Store Shipping
with FedEx? Do you expect many other retailers to quickly follow suit?
Time will tell if Wal-Mart’s site-to-store service to consumers has wings. It’s not wise to bet against Wal-Mart in anything they do because more times than not they will end up on top, but I do question what real advantages are in place for the consumer when the idea of buying online in the first place is convenience? Is it really convenient to order online than still have to go to the store to get your order? I don’t know. My gut tells me this might not be for everyone.
I would this to work very well in markets where there are few if any Wal-Marts and a reasonable number of FedEx/Kinkos locations. As the WSJ article points out, this may be especially effective around college campuses and with Millennials who are accustomed to making large purchases online. It will be interesting to see if they expand the test to additional markets where Wal-Mart has a greater store presence.
For some, this may be a non-advantage but for others this is a big advantage. The demographic of the Wal-Mart consumer is all about saving money first and then convenience. Therefore, having the shipment sent to local Fed X offices where Wal-Mart stores are not conveniently located seems to be a winner.
One of the purposes of on-site pick up is to get customers into the store, and then to get them to spend more. This sort of obviates that goal, doesn’t it?
Still, offering options and providing convenience are prime strategies, and FedEx locations have become ubiquitous, so I’m sure it’s a plus.
City-dwellers have long envied their exurban counterparts for their easy access to Walmart. The free FedEx pickup option may not sound impressive to those who live near a Walmart, but for folks who don’t have one, this could be a game-changer.
This can be a big winner for Wal-Mart in areas where they have little to no footprints. Those are the second and third level populated areas that FedEx covers. But how much coverage can FedEx have in those smaller locales? No one can be everywhere, try as they might.
If Wal-Mart is not physically in a community chances are Best Buy and Target are not there either. So this will be an easy coat tail for them to grab hold of and follow the leader’s lead.
Another strong point for yesterday’s and other recent discussions about smaller footprints in outlying areas where large footprints are not feasible.
There are no single solutions to any retailer looking to grow their business and build market share. It is a constant evolution in approaches. The more niches you can serve in a cost effective way the greater your chance of increasing volume and market share in an increasingly fragmented and sophisticated marketplace.
The FedEx partnership is simply one additional solution offered to Walmart customers who might never have shopped at a Walmart or to those who do shop but are restricted in the frequency of their purchases due to geographical location.
One aspect that may have been overlooked is that Walmart has found a way to serve a niche cost effectively. In effect FedEx is sharing in the logistic cost of bringing convenience to customers. FedEx gains ground/air business and they also assume the cost of storing the purchased product on site and the payroll to service the customers when they come to pick it up. This is a cost that Walmart would otherwise have to assume.
This is a very innovative approach.
Sounds like the old JCPenney catalog stores to me but with FedEx office gaining traffic. Looks like a Win-Win to me.
I don’t really understand the “order online/pick-up at store.” I guess people do it, but other than needing it that very moment, why would anyone go to the store? In any case, they apparently do.
Then my next question is, why would Wal-Mart ship from the store? Why don’t they ship directly from the walmart.com facility? I suspect they do. Wal-Mart isn’t dumb by any means. The extra cost of having the store in the middle of this delivery is more than the cost of shipping from the online distribution center.
So, here is what I think the deal is. You order online. If you don’t want to pay shipping, you have two choices. Choice 1 – pick it up at the store. Choice 2 – pick it up at the local FedEx office. If you want it delivered to your home, you pay shipping.
This is a very innovative means of developing speculative market areas and monitoring future store location and size potential with minimum financial risk. The exercise also increases market share in our current free market depression thus fulfilling another ongoing need to maximize turn.
As an interested observer, I will be monitoring how FedEx’s competition will react. USPS, UPS, and other shippers must respond to this or suffer what may be significant intruder penetration into core business market share holdings. Anyone that takes their eye off of market share holdings even for a second in this seemingly unending depression will shrink to oblivion quick. None the less, it will be fun to watch how well this new idea moves the lines of growth.
This is another side of the discussion about Walmart’s small store movement, effectively converting FedEx offices into mini-Walmart delivery points. As I have pointed out, there are three components to retail: 1. The meeting of the minds of shoppers and retailers – the actual SELLING process, 2. The transfer of merchandise and services, 3. The transfer of money.
This latest initiative plays to the tremendous skills and resources Walmart has in logistics – the movement of the merchandise. They are far less skillful at getting the merchandise to the shopper inside the four walls of the store (but their competition is mostly not very good at this, either.) But this FedEx initiative sidesteps that problem for some share of their business. And FedEx is obviously positioned to make the final delivery to the home, depending on success of this pickup option, and how that final mile will be paid for.
This is a further step in “The Amazonification of Walmart,” and the continuing Convergence of Online, Mobile and Bricks-and-mortar (COMB) retailing. The future is arriving with all due haste! 🙂
I think that there is no question that Wal-Mart can optimize the operational model to expand their reach into markets where they have little to no penetration. The big question in my mind is whether the economic benefit is still there, after the shipping costs. If Wal-Mart can negotiate aggressive rates with FedEx and end up with lowest to lower priced options in those markets, then the deal looks attractive.
If not, then the proposition would only work for customers who want the Wal-Mart brand and are willing to pay a bit more to get it. Really–how many of those are there?
This is clearly not a winning formula for Wal-Mart. First, their model does not support this expense as part of their profit picture. Second, ship-to-store of food items and many soft goods has been a failure, at best, for other retailers. Finally the average Wal-Mart customer is not ready, or willing to defer these purchases for 1-2 days, when they could very well from someone else. Deferred gratification is not a strength of Wal-Mart, or most other retailers for that matter.
I would put his squarely in the “helps little but hurts less category”: WM grew into fame and fortune by selling dish soap and other virtual commodities very cheaply, eventually becoming a de facto monopoly in the rural and small town areas they served; once they have to compete against the whole online world, I see most of that advantage disappearing; and this concept goes one step worse, since these potential customers by definition will have no exposure to the b&m store.
But the most remarkable sentence was this:
“Wal-Mart doesn’t have any stores in Boston and only two in L.A.”
now there are some untapped markets!
Great move by WM. And don’t forget FedEx locations such as PakMail franchises where orders can be picked up. For those who doubt that this is an important service from Walmart because customers must travel to retrieve their purchases, please remember two things: First, shipping is free. And B (are you smiling?), customers can order from the entire Walmart catalogue, not just from the items on the shelf in a distant (or nonexistent) location. It’s absolutely Amazonian (dot com)!
This is a great model for big boxers like Target, Home Depot, Lowe’s, Staples, and Office Depot.
I’m obviously missing something here.
If you can have Walmart ship to your local FedEx office for you to pick up the merchandise there, why wouldn’t you simply have Walmart ship to your home, and have FedEx deliver, and do away with the inconvenience of having to pick it up yourself?
What am I not understanding?
It sounds good; however, what if the purchase doesn’t work out? If a return is necessary, is it still free?
Yes, because it’s not always convenient to pick up your purchase at Walmart if it’s not nearby. Picking up a purchase at a FedEx facility makes good sense as another option for consumers. Of course, delivering direct to consumers is usually most convenient and, with lots of retailers offering free shipping, this should not be forgotten as a competitive tool.