Walmart wants to one-up Amazon.com in the fight for online shoppers.
The world’s largest retailer is rolling out a next-day delivery service to counter Amazon’s recent move to speed shipment times for top customers to just one day from two.
Beginning Tuesday, Walmart customers in Phoenix and Las Vegas who buy at least $35 worth of goods get free one-day shipping. The offer, which Walmart had hinted was in the works and will be applied to as many as 220,000 items, will extend to Southern California in the coming days and will reach about three-quarters of the U.S. by the end of the year.
Unlike Amazon, which will spend $800 million this quarter to reduce delivery times, Walmart said its shift will actually cost the company less, since the items will typically come in just one box from a single warehouse that’s closest to the customer. Keeping a tight lid on expenses is paramount for Walmart, whose domestic e-commerce business isn’t profitable. The operation is forecast to lose more this year than it did in 2018.
“Anytime someone shops next day, it is guaranteed to cost us a lot less to ship,” Marc Lore, Walmart’s U.S. e-commerce chief, said in an interview. “We are not paying the carriers any more. That’s in contrast to online orders that come in multiple boxes from multiple locations, which can be quite costly.”
Lore declined to say whether the expected savings could help the online business get out of the red faster.
The next-day shipping applies to a broad range of merchandise — up to twice the number of items found in a typical Walmart supercenter — and include Bounty paper towels, Gentle Giants dog food and store-branded diapers. Unlike Amazon’s one-day delivery, which is available for its Prime customers who pay an annual fee of $119, Walmart’s service will be available for most shoppers without a membership fee.
“The Walmart offer is affordable for consumers and Walmart alike,” Brandon Fletcher, an analyst at Sanford Bernstein, said in a note Tuesday. “This will just affirm Walmart’s survival for investors.”
Walmart’s goal of reaching three quarters of the U.S. would put it on par with Amazon, which can deliver at least next-day service to 72 percent of the U.S. population, according to a March note from RBC Capital Markets.
Walmart’s main website will feature a button that lets shoppers enter a separate page displaying the items eligible for the service. Everything in the cart must be eligible for NextDay delivery to qualify. Lore estimates that about half of all online orders will automatically qualify for next-day shipping, as the items eligible are those most commonly purchased.
The offer doesn’t apply to fresh and frozen food, which is operated separately and offers same-day home delivery for a fee.
Walmart will rely on its existing network of national and regional transportation companies to handle deliveries. For the past year, Amazon has offered to help entrepreneurs fund startup delivery businesses to expand its own logistics capacity, and this week the internet giant said it would extend the offer to its own employees as well. Walmart, meanwhile, has experimented with having its staffers make deliveries on their way home from their shifts.