News has been out all day about same-day delivery being tested by Wal-Mart Stores Inc. (NYSE: WMT). The move, if successful and if launched, is an obvious front to challenge the likes of Amazon.com Inc. (NASDAQ: AMZN) and other services. The tests have been ongoing in Philadelphia and in Northern Virginia for merchandise bought online. Before getting too excited, this really looks like a continued evolution of the business model as Walmart is looking for ways to go out and recapture revenues that have gone around it over the last decade or so.
If you have tracked the Walmart and competitor layaway plans, it is no secret that Walmart and other retailers are getting into a price-war and a low-cost services war for every dollar spent this coming holiday season. Again, this all threatens Amazon.com if you believe that Walmart shoppers are going after Amazon's top customers. The problem is that Amazon Prime customers are real loyalists and only pay $79 per year, but those loyalists also act to squeeze Amazon margins as well.
It is worth noting that Walmart already uses some brick-and-mortar stores to fulfill some online orders. That alone will cut down massively on distribution costs, but obviously there are limitations here based upon geography. Walmart has users paying a flat fee, but that alone might not be enough. Traditionally it has been such that Walmart buyers go buy their goods at Walmart's real stores or they buy online goods at Amazon.com or elsewhere. Maybe that will change and maybe it will not.
In the world of electronics, Walmart has a huge opportunity to compete against Best Buy Co. (NYSE: BBY) as Best Buy is often not exactly the fastest at delivering goods for installation. There is a reason that Best Buy is often considered merely to be a physical showroom for sales that end up going through the Amazon.com system.
It is worth noting that Freeshipping.org shows free shipping on orders of $45 or more on over 100,000 items. Walmart is still trying to catch up to the online world and so far it is playing a game of catch-up. The latest news is one more step in the evolutionary process.
JON C. OGG