The boxes flying down the line at this
2.3-million-square-foot distribution center are
sorted, scanned and labeled, then loaded into trucks
destined for the shelves of the country's biggest
retailer. Walmart employs more people than any other
company in the world, and 90% of Americans live within
10 miles of a Walmart. Yet when it comes to e commerce,
Amazon is the clear leader with 39.5% of the market
share compared to Walmart's 7%. And with the global
pandemic helping shift shoppers' behavior for good,
dominance in online shopping is now paramount. Last year,
people spent more on Amazon then at Walmart for the
first time. Now Walmart's got a new playbook and new
leadership as it races to catch up.
We have 4,700 locations across the U.S. and if the
store acts like a fulfillment center, we can
send those items the shortest distance in the
fastest time.
Over the past few years, Walmart's built more than 30
warehouses like this, some with robots and people,
entirely dedicated to fulfilling online orders.
Workers at stores are also picking and packing online
orders, as Walmart turns dozens of stores into
micro-fulfillment centers. It's added membership
program Walmart+ to compete with Prime, invested heavily
in local delivery programs in homes and with drones,
and started packing and shipping orders for
third-party sellers as it works to entice them to
Walmart.com.
I'd say assortment is the linchpin to this plan and
then sellers are a means to get to assortment.
They're looking at Amazon's market share saying how can
we grow this market share? We need more sellers. We
need more selection.
Customers trust us for food and consumables. They trust
us for general merchandise, but they're looking for
every item that they could think of. We want to make
sure that we're able to do that for them.
CNBC went to Walmart headquarters in Bentonville,
Arkansas, for the first ever public interview with
Walmart's new head of e-commerce Tom Ward to find
out the truth behind his big plans for catching Amazon
online.
Walmart was founded in 1962 by Sam Walton, growing to
nearly 2,000 stores by the time Jeff Bezos founded
Amazon in 1994. Despite its in-store dominance, Walmart
was notoriously slow to the e-commerce game, not
launching its third-party marketplace until 2009. It
didn't make real headway until 2016, when Walmart
bought discount online retailer Jet.com for $3.3
billion, tapping co-founder Mark Lore to lead
e-commerce, where he stayed until last year. In 2018, it
spent big to get into the booming online market in
India with Flipkart, and also bought online fashion
brands like Bonobos and Eloquii. Then in 2020,
Walmart shut down Jet.com, although CEO Doug McMillon
says he would buy it all over again.
You look at the trajectory of our business, it changed
when we made that acquisition. The Walmart
brand really has extended to reach all kinds of people:
affluent customers, younger customers, urban customers.
We were going to need a brand to be able to use to
attract some of the brands that did not yet want to be
in our stores.
Also in 2020, Walmart partnered with Shopify to
bring thousands of mom-and-pop sellers to
Walmart's marketplace. That's the term used to
differentiate items sold by third-party sellers from the
first-party merchandise bought and sold by Walmart.
2020 also saw the launch of Walmart+ and Walmart
Fulfillment Services to rival Fulfilled by Amazon,
or FBA, but leveraging stores and their built-in
workforce to keep costs low.
Walmart's definitely like doubling, tripling down on
their e-commerce business, trying their best to take
market share away from Amazon or catch up to them.
The truth is though, they still have a long ways to
go.
Last year, Walmart opened up its marketplace to
international sellers. This summer, Walmart plus weekend
is happening for the first time with exclusive online
deals for members just like Amazon's Prime Day. And in
February, Tom Ward took over Walmart's e-commerce
division.
The nearest Walmart to your customer is the one in their
pocket. It's also the ultimate store. It should be
an endless assortment. It should be completely, you
know, full of solutions for whatever customers are
looking for. And increasingly, marketplace
sellers really help us do that.
We went to a bustling conference for e-commerce
sellers in Las Vegas in March that's usually
dominated by Amazon chatter. For the first time in the
Prosper Show's seven-year history, Walmart also had a
major presence
Because they're smart, and they know that this show is
where the sellers are, and they want to get a lot of
more brands on the Walmart.com channel.
It's the only other platforms that it could
really be competition to Amazon.
Michael Lebhar started selling on Walmart seven
years ago when he was just a sophomore in high school.
At first, my mom was not happy because my whole room
was just a bunch of USPS boxes.
Now Lebhar says Walmart.com is his primary platform for
his Spawn Fitness brand, which he says did about $3.5
million of sales on Walmart.com last year,
compared to under half a million on Amazon.
On Walmart, our profit margins too are so good.
Like people are always like oh, Walmart's price
competitive. Which, you're right. Like sometimes you're
not able to charge as much. But on Amazon you're
spending so much more on advertising, like you don't
even realize you're, you're down so much because of
that.
The cost of advertising on Amazon has increased, but
people are always going to do it because more than ever
before it seems, if you're not advertising on Amazon,
you're not going to get seen.
As the leader, Amazon can charge sellers more for ads,
seller account support and fulfillment services. Jaré
Buckley-Cox used to work at Amazon and now helps lead
Walmart Fulfillment Services, which launched in
2020. WFS hasn't yet raised prices and unlike FBA,
offers seller support for free.
Year over year, Walmart fulfillment services grew
500% In GMV. We add sellers every day. Our competitive
advantage and what's drawing sellers into the program is
the fact that they believe this is a marketplace that
is built for them.
But for now, Walmart still has about a tenth of the
sellers and a tenth the value of merchandise that
Amazon has. Greg Mercer founded seller software
company Jungle Scout, which tracks industry numbers with
regular surveys of thousands of sellers.
The fact that there are significantly less sellers
on Walmart, I think creates less competition. And the
result of that is the Walmart sellers typically
have a more profitable business than what Amazon
sellers do.
Surveys earlier this year, founded 95% of Walmart
sellers turn a profit, compared to about 76% on
Amazon.
Five years ago, Amazon sellers just wanted to be on
Amazon, they didn't want to go anywhere else. But that
story has changed. Most Amazon sellers that I talk
to talk about, how can I diversify more?
About a year ago, we estimated that there were
75,000 Walmart sellers and over the past year, we've
seen that number double to about 150,000 Walmart
sellers today.
Lauren Stark runs business strategy for mDesign, one of
the biggest home storage brands on Amazon with a
total of $310 million in online sales last year.
MDesig started selling on Walmart in 2019 and started
investing more there during the pandemic.
Because everyone was at home. So that's when we
really ramped up our strategy to to go on to
different marketplaces, and specifically Walmart.
Diversify the risk, diversify the reward as
well, and reach more customers.
Stark says mDesign will likely do about $5 million
in sales on Walmart this year, compared to $280
million on Amazon last year.
We are seeing, you know, really nice increases year
over year on Walmart.
Stark says Target has been even more successful because
there's even less competition. Only brands
that are invited by Target can sell on its site. In
contrast, it's relatively simple for anyone to start
selling on Amazon and competition is cutthroat.
You can take you know some stereotypical like saturated
product on Amazon, like a garlic press or something,
where there's 200 of the same thing. There's maybe
like three people selling a garlic press, for example,
on Walmart.com.
But Walmart wants that to change.
We want assortment on the platform. So again,
customers can come and find anything that they're
looking for and get it delivered in any means that
they want.
Walmart is also adding assortment by launching a
growing collection of its own brands, especially in
apparel and home, that appear first online and
later in stores. But as Walmart's third-party
assortment grows, so too does the risk for bad actors
like Mpow and Aukey, two huge electronics sellers
doing nearly $1 billion in sales that were kicked off
Amazon but remain active on Walmart.
They kicked them off for buying reviews. And I was
sad to see that Walmart allowed Mpow and Aukey to
now sell on the .com platform. So as positive as
I am with Walmart, I'm a little bit disappointed that
they allowed those two brands with their practices,
which according to the FTC, is illegal to do. You can't
buy reviews.
Walmart says it looked into the allegations and didn't
find the same behavior from Mpow and Aukey on its site.
As it works to boost selection, Walmart also
opened its marketplace up to international sellers last
year.
We know that Amazon had a big crackdown last summer on
fake reviews. I think it primarily impacted Chinese
sellers the most. That, combined with Walmart
allowing international sellers, we saw like a huge
uptick in the percent of Chinese sellers on Walmart.
Still, sellers say Walmart remains more stringent than
Amazon when it comes to approving new sellers.
And we're really proud of the track record of having
high standards for sellers to get vetted before they
get on the program. And we're going to continue
that.
Another big way Walmart is enticing sellers, which
Amazon can't match, is the opportunity to get products
onto thousands of brick-and-mortar shelves.
Because you know, each store has to get so many cases in
stock. I mean it's like game over. If you're just like a
private label seller, to be able to have your product in
Walmart stores is like a holy grail.
Our product was like at one point, the number one in the
category on Walmart.com. So we got an email from a
Walmart buyer being like, you know, would you be
interested in more talks?
This year for the first time, Walmart.com sellers
were given first exclusive access to a program called
Open Call, where sellers pitch their products for
space on Walmart store shelves. Some 2,000 sellers
applied.
We've got a real mission to increase assortment. So it
just made sense that when sellers are bringing
high-quality assortment, we want to make that available
to our customers in our stores or online.
Walmart's huge number of stores also makes it the
undisputed king in grocery. Amazon bought Whole Foods in
2017 and is trying to disrupt the space by making
two of them entirely cashierless. But Amazon.com
and Whole Foods each accounted for less than 1.5%
of the grocery market, compared to Walmart's 18%.
Grocery is less profitable than general merchandise,
but the real power play is for Walmart to get customers
to fill their virtual baskets with a mix of
grocery, general merchandise and third-party items.
Maybe you're shopping for only a Walmart grocery store
product, but at least that traffic is there and it is
heavy and a lot more eyeballs on your products
now.
Despite big upward trends during the pandemic, both
Walmart and Amazon shares fell sharply after Q1
earnings were reported, as supply chain issues and
increasing costs cut into profits. But Walmart's long
standing reputation as a leader in low prices brings
an advantage right now, as customers look for deals
with inflation at a new 40-year high.
To save you even more, always low prices, always
Walmart.
As part of Walmart's strategy to unite more parts
of its vast retail empire, it recently combined what
used to be two separate apps: one for Walmart's own
goods, primarily grocery, and another for its
third-party marketplace products.
And wherever there's friction in that process,
wherever there's two apps and they should be one under
one roof, we're now working to remove all that friction.
Walmart+, launched in 2020, also combines benefits for
loyal grocery customers with online shopping perks. It's
Walmart's answer to Prime, which Amazon launched all
the way back in 2005. Prime now costs $139 a year for
benefits like one-day shipping on more than 15
million items, two-hour grocery delivery in 2,000+
cities, access to Prime Day deals and Amazon's
entertainment branch: Prime Video, Amazon Music, Prime
Reading, Prime Gaming and Amazon Photos. Meanwhile,
Walmart+ members pay $98 a year for benefits like free
same-day delivery from stores, free shipping on
Walmart's own merchandise, cashierless scan and go
shopping at some stores, and exclusive access to big
sales events like Walmart+ Weekend happening June 2-5
this year. And amid record-high gas prices,
Walmart just added extra fuel discounts for its plus
members who now get between five and 10 cents off, not
only at Walmart's own pumps but at some 14,000
participating stations including Exxon, Mobil,
Murphy and Sam's Club. Walmart is also using its
stores, and specifically their proximity to
customers, as an edge, making big investments in
speedy local delivery programs.
People are coming to us for burgers and hotdogs, but
they can buy a brand new smoker. They can get a whole
new swimsuit outfit. They can get all of that under
one roof, in one application, in one place.
And we can fulfill it for them with great speed thanks
to our footprint.
Last year, Walmart launched Express Delivery for
Walmart's own merchandise that can reach your door in
two hours or less for a $10 fee, with an additional fee
of at least $7.95 for non-Walmart+ members. This
doesn't include marketplace items, but Ward says it
drives traffic for those as well.
We can say to a customer: Hey, you know, add these
items that you want this evening. But if you want
that very specific item, we can bring you that really
quickly as well.
Walmart has been ramping its logistics operations since
at least 2017, building 31 separate fulfillment centers
devoted to e-commerce and investing big in robotic
e-commerce fulfillment, following Amazon's lead.
Also like Amazon, Walmart has independent drivers,
what it calls its Spark Network, who handle much of
the cumbersome, expensive last-mile delivery.
We can activate drivers to come and collect items and
deliver them to our customer. But as the density
grows, the cost comes down.
So much so that last year, Walmart started delivering
goods for other retailers in a program that calls
GoLocal.
We've announced some really exciting clients like the
Home Depot and the Chico's and others, including small
and medium businesses. And what we're seeing is, as
they share in our last-mile capabilities, density
increases and the cost for both of us goes down.
In Scottsdale, Arizona, Ward says Walmart's completed
5,000 deliveries with Cruise autonomous vehicles.
And this vehicle turns up like magic outside and they
can grab it out of the backseat. And then
increasingly, they can put their return in the backseat
and send the car to the Supercenter.
Walmart also just announced its expanding drone delivery
by the end of the year, deploying them from 37
stores for a reach of 4 million households across
Arizona, Arkansas, Florida, Texas, Utah and Virginia.
Customers pay $3.99 for items totaling up to 10
pounds to be delivered by drone in 30 minutes or more.
In the same way that the store is starting to act
like a fulfillment center, they're also starting to act
like a drone launch delivery.
And there's the growing popularity of buying online
and picking up curbside, a benefit Amazon can't rival.
In some of these other areas where Amazon Prime doesn't
have like the two- and three-, four-hour delivery,
but there's a Walmart store nearby. You can be living in
South Dakota or something and you can get your product
in two or three hours, whereas on Amazon, for Prime
it might take even more than two days.
While you can't currently pick up third-party
purchases at Walmart stores, Buckley-Cox says items
shipped with WFS will soon be able to be forwarded to
stores for possible same-day pickup or delivery. And
while Amazon delivers groceries to doorsteps and
some items inside doors and garages, Walmart has a
unique delivery program straight into your fridge
for $19.95 a month.
It is so good for our elderly customers that can't
get out. Or if somebody has broken an ankle or
something, broken a leg, whatever, you know.
Thousands of full-time Walmart associates like Mike
Edwards spend their days filling up a fleet of fully
electric vans with groceries and general merchandise.
We don't step foot inside the garage or the residence
without this on.
Then bringing it inside people's homes and putting
it away in the refrigerator. Trusting a stranger to enter
your home may sound wild, but the program has been
working well enough that Walmart is rapidly expanding
it to reach 30 million homes.
All of our associates wear cameras on their vest, and
every part of the delivery is recorded. They can't
actually access your home until we confirm that their
camera is turned on and working. And so as a
customer, if you place an order and you are curious,
you can watch the full experience.
InHome associates will also take some returns back to
Walmart for customers. And Walmart is expanding the
program to include alcohol delivery and other highly
requested services it's not ready to disclose.
And so they're like, oh my gosh, you're here like, can
you walk the dog? Like, can you take out the trash? It's
like, how else can you help me?
While marketplace purchases can't currently be delivered
in home, it's another way for Walmart to build loyalty.
InHome offers a unique entry point into Walmart for a lot
of our customers because we have a pretty
distinguishable offering on the market. And now they're
on our website, and they're shopping for groceries, but
they're seeing other things they might want to buy.
They're seeing things available in marketplace.
There are things that they would never expect to see at
Walmart. And so now we have them as a loyal customer in
a much more expansive and much stickier way than we
would have expected.
You know, they're not going to catch up and be 50%
market share next year. But if they continue to do the
things that they're doing, gradually they will continue
to eat more and more market share, I believe.