Wal-Mart Ready to Duke it Out with Amazon (WMT, AMZN)

Wal-Mart will be spending billions to narrow the gap with Amazon and top the e-commerce segment.

Walmart WMT

Amazon.com, Inc. (NASDAQ:AMZN) has been rapidly expanding in various segments but its bread and butter remains e-commerce. Now it looks like Wal-Mart Stores, Inc. (NYSE:WMT) is ready to take on the online retail giant by pouring billions into building more warehouses and using drones to make deliveries to achieve a more dominant position in the e-commerce segment.

According to Justen Traweek, Wal-Mart ‘s vice-president of e-commerce supply chain and fulfillment, the world’s largest retailer will double the number of warehouses it has by the end of this year in a bid to challenge Amazon in the e-commerce segment, which the Seattle-based online retailer dominated for years.

In addition, Wal-Mart has also invested heavily on robots to do everything from automated product sorting to tracking goods, much like Amazon’s own robotics program, which had the company replacing some of its human staff members with Kiva-made robots. Traweek said Wal-Mart’s robotics program would enable the company to ship products to majority of US cities faster and more efficiently.

“We have doubled our capacity in the last twelve months and that allows us to ship to a majority of the US population in one day,” Traweek said.

Wal-Mart’s newest warehouses are not only massive; the hi-tech facility can handle more than 70% of Wal-Mart’s bestselling products.

As the largest retailer in the world, Wal-Mart has 4,600 physical stores in the United States and more than 6,000 to the rest of the world. Since launching its online retail business in 2000, Wal-Mart has 5 warehouses. Now, the company plans to add 10 more during the first quarter of 2017. That said, it’ll take more than that to give Amazon a real competition. Amazon boasts of 40 giant warehouses and plans to open five more next year.

For 15 long years, the Bentonville, Arkansas-based supply chain has been trying to outperform Amazon in the online retail segment to no avail.  Will the investment in robotics and adding massive warehouses give Wal-Mart the edge it needs to outperform Amazon?

Yes, according to Steve Osburn, director of supply chain with consultancy Kurt Salmon. Osburn thinks that by investing big to improve delivery and creating more warehouses will open many doors for Wal-Mart, allowing the company to go head to head with Amazon, along with other major online retailers. However, Amazon is also growing at an outrageously rate and keeping up with the e-commerce giant is definitely an ambitious plan. Will the strategy work? Only time will tell.

It’s worth noting that Wal-Mart has expanded as well. Since fiscal year 2011, the retailer has acquired 15 e-commerce startup so it’s not surprising the retailer is developing its own e-commerce business. One of Wal-Mart’s most high profile acquisitions is online retailer Jet.com, which the company bought for $3 billion last month.

During Wal-Mart’s upcoming annual investor day, it’s expected that shareholders will discuss the progress of the retail chain, including its e-commerce business.

1 Comment on Wal-Mart Ready to Duke it Out with Amazon (WMT, AMZN)

  1. After placing 2 orders online at walmart.com in the past week, and having both fall through the cracks due to incompetence at a store level, I don’t see this working out for Walmart. They might as well give the money to charity, it would be more productive.

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