Instant Gratification - Walmart Style!
While on the topic of Walmart and Marketplace, I just read two pieces of news which got me excited.
Times UK had published an article a few days ago about Amazon being in secret plans to open High Street Stores in the UK.
While Amazon was quick to refute this (see Telegraph article), a second piece of news across the pond made for an interesting read.
Walmart has announced plans to offer "Click and Collect" services for their website. Wall Street Journal quotes Walmart.com's Chief Executive Raul Vazquez as saying-
"There was a time when the online and offline businesses were viewed as being different. Now we are realizing that we actually have a physical advantage thanks to our thousands of stores, and we can use it to become No. 1 online."
This is a probably a big differentiator, if not the biggest for any “Bricks and Mortar” retailer to compete with pure online retailers like Amazon. While Walmart is current planning on supporting the "Ship to Store" concept, getting to the point where they can leverage existing store stocks would probably drive for instant gratification (aka the erstwhile Circuit City's service promise of "Pick Up in 24 minutes").
What makes for interesting reading about the Amazon article is the fact that this is based in the UK. I think this service will be a much larger differentiator in the UK. A big challenge that retailers face in the US is of geographical proximity. Even Walmart with its large network will be hard pressed to cover a large percentage of the population with the "Store Pickup" functionality. On the other hand, Tesco, Sainsbury, and probably even ASDA would probably be able to cover a large chunk of the population with this functionality. Moreover, if they integrate the online order channel with their Direct Grocery operations, which support doorstep van delivery, this will go a long way in differentiating themselves from online sites.
Moreover with the recent history of Royal Mail strikes, this might make this functionality the key differentiator for fulfilling cross channel orders efficiently, cheaply and quickly in the UK.
Comments
Right now (at least in the US, not so sure about UK), Amazon has a tremendous advantage because it does not operate thro' stores. In the US, Online orders aren't taxed unless the order is to be shipped to a State where Amazon has setup operations (must be 3 States in the US). This is an ace up Amazon’s sleeve that the Walmarts don’t have today. While setting up stores will enable Amazon to compete better, they would be mindful of the negative impact it can cause for them. Interestingly, there is now some talk about new legislation that will mandate taxes even on online orders. If passed, this could be a game changer and Amazon will probably fast-track setting up their stores, but till then they are more likely to compete thro’ other mechanisms (like the “Same Day Delivery” Service they introduced recently to a select few US cities)
Posted by: Arun Channakrishnaiah | January 4, 2010 7:27 PM
Arun - This is a very valid point, especially in the US. In the UK, with VAT being charged even on online orders, this advantage is frittered away.
Also, in the US, quite a few states (I know of CA & MN for sure) expect the customer to declare and pay taxes on online orders, though it is not practically tracked or enforced.
And even the mechanisms that Amazon uses like the "Same Day Delivery" Service would add delivery charges to the customer (or reduce the profit margin for Amazon) whereas leveraging Store Stock might be cheaper for Brick & Mortar retailers.
Having said that, as I noted above, the Geographical spread does cause this to be a smaller advantage in the US than in the UK.
Posted by: Prasad Acharya | January 12, 2010 6:56 AM