Late last week, Wal-Mart announced two programs clearly intended to steal share from e-commerce giant Amazon. But Amazon executives are not the only retailers reeling; e-retailers of all sizes are likely to feel the impact.
The programs include a free two-way shipping offer on 60,000 electronic, video game, toy, home appliance, furniture, jewelry and baby items through December 20 and a “Buy Online, Pick Up Today” offer that allows customers to pick up online purchases at any one of Wal-Mart’s 800 major metropolitan market stores.
The offers are a key component of Wal-Mart’s strategy to attract media and consumer attention, enhance its online value proposition and ultimately gain share of consumers’ wallets. Kurt Salmon expects that following a successful pilot, Wal-Mart will make these offers permanent as well as expand the SKU depth and categories included in the free two-way shipping offer.
With tepid comp-store sales growth, limited new store openings and eye-popping online channel growth, Wal-Mart is expected to continue to innovate in and focus on the online channel.
Wal-Mart isn’t new to marching in and quickly dominating entire industry sectors. For example, when the retail behemoth decided to compete actively in the grocery industry, it grew to become the industry’s biggest grocery retailer in a little over a decade—from a 6% market share in 1997 to a 25% share in 2010 (Source: Euromonitor).
Like many grocers of that era, retailers who are today dependent on the e-commerce channel for growth could watch sales and margins dry up rapidly if they are not prepared with an appropriate response.
Although this holiday season is already in full swing, retailers can reduce shipping rates and increase customer outreach as quick response to Wal-Mart’s strategy. But the industry also needs a plan of attack for the future.
The key is to focus on customer value and differentiation. Historically, mimicking Wal-Mart has failed most retailers, as very few can engage in price wars with the legendary giant and succeed. As such, considerations should include:
Differentiated Strengths. Are you fully leveraging all of your available assets, capabilities and strategic partnerships to provide the premier multichannel consumer experience aligned with your strategy? Wal-Mart’s recent offer creates another reason not to compete with the retailing giant. Consider evolving your offerings so they become differentiated from Wal-Mart’s in key categories, or distinguish yourself with superior customer service or shipping speeds.
Consumer Insights. Do you fully understand your core customer and what she or he values in the online channel?
Experience. For multichannel retailers, do you provide a consistent and compelling experience?
Financials. Are your shipping and handling charges in line with those of your key competitors? What percentage of your 2011 financial plan profits come from shipping charges? Are these profits sustainable without inhibiting market share?
Armed with answers to these questions, retailers will be better prepared to address Wal-Mart’s shipping offers and formulate the best response.
17 November 2010