Wal-Mart Stores Inc. purchased Jet.com for $3.3 billion for a number of reasons last year, including the opportunity to put co-founder Marc Lore in charge of the company's e-commerce business.
Lore has accomplished plenty in the past few months -- restructuring the digital team, offering two-day free shipping on some items and spearheading the acquisition of online retailers such as ShoeBuy.com, Moosejaw and ModCloth. But Lore, along with the smart-cart technology that powered Jet.com, also is the catalyst behind an e-commerce initiative intended to steer more shoppers to Wal-Mart's stores.
Wal-Mart's new pickup discount program, which was announced last week and will be available to shoppers today, will offer customers a discount on selected items purchased online if they agree to pick them up at stores. The click-and-collect discount will apply to 10,000 online-only items that will be denoted on the company's website in the early stages, but increase to 1 million by the end of June.
The Bentonville-based retailer introduced the program in an effort to compete with other retailers such as Amazon.com by leveraging its strengths, which include an efficient distribution network and about 4,700 U.S. stores.
Neil Stern, a senior partner with Chicago-based McMillan Doolittle, said creating methods to drive customers to stores is critical for Wal-Mart and other brick-and-mortar retailers as they try to blend e-commerce and in-store sales.
"What they found out over the last holiday is simply building e-commerce sales isn't enough if those sales aren't, in essence, coming from your store traffic," Stern said about the retail industry, which has experienced a glut of store closures through the first four months of 2017. "It's not enough just to trade off an e-commerce dollar for a store dollar because those e-commerce dollars aren't as profitable, frankly. They've got to figure out a way to get them to the store, drive traffic, have people buy other items and basically work the retail formula."
Stern said the pickup discount also is the first tangible deployment of the smart-cart technology Wal-Mart acquired when it purchased Jet.com last year. The algorithm developed by Lore can determine discounts on goods in real time based largely on the cost it will take to ship the items to their destination.
Examples of eligible items under Wal-Mart's pickup program include an infant car seat that will be discounted $7.40 and and a Lego set that will save customers $2.55 if picked up at a store.
Wal-Mart said it is able to offer the discounts because it costs less to deliver products ordered online to its stores than shipping them directly to a customer's home. The retailer can pass some of the savings on to customers.
The program builds on another introduced by Wal-Mart earlier this year that provides free, two-day shipping on orders with a $35 minimum. Lore said in a blog post Wal-Mart is creating "price transparency to empower customers to shop smarter and choose what's best for them."
Carol Spieckerman, a retail consultant and president of Spieckerman Retail, believes the newest option is an indication Wal-Mart is not just responding to what shoppers are doing in the current retail environment, but "shaping the choices that they are making."
"Many retailers are still trying to work out their profitability propositions as they add new convenience options," Spieckerman said. "Most are simply hoping that the majority of shoppers will choose options like order online, pick up in-store, that are easier for retailers to execute and don't eat away at margins. Wal-Mart is using a customer-centric tactic to incentivize shoppers, one that in no way limits choice. A seemingly simple program that brilliantly addresses a retail pain point."
Wal-Mart ultimately hopes the pickup discount option will lead customers to step into their stores to purchase other merchandise as well. But introducing the initiative doesn't guarantee adoption as shoppers continue to expect convenience -- getting any product, anywhere and at any time -- from retailers.
Stern said click-and-collect formats have been successful in Europe, but haven't caught on as quickly in the United States, largely because of Amazon. A discount on items has potential to attract shoppers, but Wal-Mart must make sure the process of picking up items at stores is as simple as possible for those who are only interested in collecting their order and leaving.
Wal-Mart has made efforts by beefing up staff, expanding drive-through pickup locations, moving designated pickup area to the front of stores and testing technologies such as a pickup vending machine.
"If I've got to go in the store and then wait 10 minutes for my item, it mitigates some of that convenience opportunity," Stern said. "So it's incumbent on Wal-Mart to execute this operation well or it doesn't have nearly the same impact."
Annibal Sodero, an assistant professor in the Sam M. Walton College of Business at the University of Arkansas, also sees a potential pitfall with pricing. Wal-Mart is offering a discount for picking up those online items, but runs the risk of others developing ways to offer the same price for home delivery.
"Wal-Mart opens up the opportunity for an entrepreneur to see that if I can offer the car seat for that price or less and get the product wherever and whenever the consumer wants, I win that sale," Sodero said. "So I would be very careful. I don't think this strategy is sustainable in the long run."
Sodero still credited Wal-Mart for working on ways to leverage its unique presence of stores with its investment potential by introducing the pickup discount plan.
He said there should be more to come, believing it's vital for Wal-Mart to be innovative as it works to create a seamless experience.
"I see Wal-Mart moving, definitely, in the right direction," Sodero said. "They're really trying to integrate the channels. They're really trying to get to the omnichannel promise."
Business on 04/19/2017