The boxes flying down the
line at this 2.3-million-square-foot
distribution center are sorted, scanned and labeled,
then loaded into trucks destined for the shelves of
the country's biggest retailer. Walmart employs
more people than any other company in the world, and
90% of Americans live within 10 miles of a Walmart. Yet
when it comes to e commerce, Amazon is the clear leader
with 39.5% of the market share compared to Walmart's
7%. And with the global pandemic helping shift
shoppers' behavior for good, dominance in online shopping
is now paramount. Last year, people spent more on Amazon
then at Walmart for the first time. Now Walmart's
got a new playbook and new leadership as it races to
catch up. We have 4,700 locations
across the U.S. and if the store acts like a
fulfillment center, we can send those items the
shortest distance in the fastest time. Over the past few years,
Walmart's built more than 30 warehouses like this, some
with robots and people, entirely dedicated to
fulfilling online orders. Workers at stores are also
picking and packing online orders, as Walmart turns
dozens of stores into micro-fulfillment centers.
It's added membership program Walmart+ to compete
with Prime, invested heavily in local delivery programs
in homes and with drones, and started packing and
shipping orders for third-party sellers as it
works to entice them to Walmart.com. I'd say assortment is the
linchpin to this plan and then sellers are a means to
get to assortment. They're looking at Amazon's
market share saying how can we grow this market share?
We need more sellers. We need more selection. Customers trust us for food
and consumables. They trust us for general merchandise,
but they're looking for every item that they could
think of. We want to make sure that we're able to do
that for them. CNBC went to Walmart
headquarters in Bentonville, Arkansas, for the first ever
public interview with Walmart's new head of
e-commerce Tom Ward to find out the truth behind his big
plans for catching Amazon online. Walmart was founded in 1962
by Sam Walton, growing to nearly 2,000 stores by the
time Jeff Bezos founded Amazon in 1994. Despite its
in-store dominance, Walmart was notoriously slow to the
e-commerce game, not launching its third-party
marketplace until 2009. It didn't make real headway
until 2016, when Walmart bought discount online
retailer Jet.com for $3.3 billion, tapping co-founder
Mark Lore to lead e-commerce, where he stayed
until last year. In 2018, it spent big to get into the
booming online market in India with Flipkart, and
also bought online fashion brands like Bonobos and
Eloquii. Then in 2020, Walmart shut down Jet.com,
although CEO Doug McMillon says he would buy it all
over again. You look at the trajectory
of our business, it changed when we made that
acquisition. The Walmart brand really has extended to
reach all kinds of people: affluent customers, younger
customers, urban customers. We were going to need a
brand to be able to use to attract some of the brands
that did not yet want to be in our stores. Also in 2020, Walmart
partnered with Shopify to bring thousands of
mom-and-pop sellers to Walmart's marketplace.
That's the term used to differentiate items sold by
third-party sellers from the first-party merchandise
bought and sold by Walmart. 2020 also saw the launch of
Walmart+ and Walmart Fulfillment Services to
rival Fulfilled by Amazon, or FBA, but leveraging
stores and their built-in workforce to keep costs low. Walmart's definitely like
doubling, tripling down on their e-commerce business,
trying their best to take market share away from
Amazon or catch up to them. The truth is though, they
still have a long ways to go. Last year, Walmart opened up
its marketplace to international sellers. This
summer, Walmart plus weekend is happening for the first
time with exclusive online deals for members just like
Amazon's Prime Day. And in February, Tom Ward took over
Walmart's e-commerce division. The nearest Walmart to your
customer is the one in their pocket. It's also the
ultimate store. It should be an endless assortment. It
should be completely, you know, full of solutions for
whatever customers are looking for. And
increasingly, marketplace sellers really help us do
that. We went to a bustling
conference for e-commerce sellers in Las Vegas in
March that's usually dominated by Amazon chatter.
For the first time in the Prosper Show's seven-year
history, Walmart also had a major presence Because they're smart, and
they know that this show is where the sellers are, and
they want to get a lot of more brands on the
Walmart.com channel. It's the only other
platforms that it could really be competition to
Amazon. Michael Lebhar started
selling on Walmart seven years ago when he was just a
sophomore in high school. At first, my mom was not
happy because my whole room was just a bunch of USPS
boxes. Now Lebhar says Walmart.com
is his primary platform for his Spawn Fitness brand,
which he says did about $3.5 million of sales on
Walmart.com last year, compared to under half a
million on Amazon. On Walmart, our profit
margins too are so good. Like people are always like
oh, Walmart's price competitive. Which, you're
right. Like sometimes you're not able to charge as much.
But on Amazon you're spending so much more on
advertising, like you don't even realize you're, you're
down so much because of that. The cost of advertising on
Amazon has increased, but people are always going to
do it because more than ever before it seems, if you're
not advertising on Amazon, you're not going to get
seen. As the leader, Amazon can
charge sellers more for ads, seller account support and
fulfillment services. Jaré Buckley-Cox used to work at
Amazon and now helps lead Walmart Fulfillment
Services, which launched in 2020. WFS hasn't yet raised
prices and unlike FBA, offers seller support for
free. Year over year, Walmart
fulfillment services grew 500% In GMV. We add sellers
every day. Our competitive advantage and what's drawing
sellers into the program is the fact that they believe
this is a marketplace that is built for them. But for now, Walmart still
has about a tenth of the sellers and a tenth the
value of merchandise that Amazon has. Greg Mercer
founded seller software company Jungle Scout, which
tracks industry numbers with regular surveys of thousands
of sellers. The fact that there are
significantly less sellers on Walmart, I think creates
less competition. And the result of that is the
Walmart sellers typically have a more profitable
business than what Amazon sellers do. Surveys earlier this year,
founded 95% of Walmart sellers turn a profit,
compared to about 76% on Amazon. Five years ago, Amazon
sellers just wanted to be on Amazon, they didn't want to
go anywhere else. But that story has changed. Most
Amazon sellers that I talk to talk about, how can I
diversify more? About a year ago, we
estimated that there were 75,000 Walmart sellers and
over the past year, we've seen that number double to
about 150,000 Walmart sellers today. Lauren Stark runs business
strategy for mDesign, one of the biggest home storage
brands on Amazon with a total of $310 million in
online sales last year. MDesig started selling on
Walmart in 2019 and started investing more there during
the pandemic. Because everyone was at
home. So that's when we really ramped up our
strategy to to go on to different marketplaces, and
specifically Walmart. Diversify the risk,
diversify the reward as well, and reach more
customers. Stark says mDesign will
likely do about $5 million in sales on Walmart this
year, compared to $280 million on Amazon last year. We are seeing, you know,
really nice increases year over year on Walmart. Stark says Target has been
even more successful because there's even less
competition. Only brands that are invited by Target
can sell on its site. In contrast, it's relatively
simple for anyone to start selling on Amazon and
competition is cutthroat. You can take you know some
stereotypical like saturated product on Amazon, like a
garlic press or something, where there's 200 of the
same thing. There's maybe like three people selling a
garlic press, for example, on Walmart.com. But Walmart wants that to
change. We want assortment on the
platform. So again, customers can come and find
anything that they're looking for and get it
delivered in any means that they want. Walmart is also adding
assortment by launching a growing collection of its
own brands, especially in apparel and home, that
appear first online and later in stores. But as
Walmart's third-party assortment grows, so too
does the risk for bad actors like Mpow and Aukey, two
huge electronics sellers doing nearly $1 billion in
sales that were kicked off Amazon but remain active on
Walmart. They kicked them off for
buying reviews. And I was sad to see that Walmart
allowed Mpow and Aukey to now sell on the .com
platform. So as positive as I am with Walmart, I'm a
little bit disappointed that they allowed those two
brands with their practices, which according to the FTC,
is illegal to do. You can't buy reviews. Walmart says it looked into
the allegations and didn't find the same behavior from
Mpow and Aukey on its site. As it works to boost
selection, Walmart also opened its marketplace up to
international sellers last year. We know that Amazon had a
big crackdown last summer on fake reviews. I think it
primarily impacted Chinese sellers the most. That,
combined with Walmart allowing international
sellers, we saw like a huge uptick in the percent of
Chinese sellers on Walmart. Still, sellers say Walmart
remains more stringent than Amazon when it comes to
approving new sellers. And we're really proud of
the track record of having high standards for sellers
to get vetted before they get on the program. And
we're going to continue that. Another big way Walmart is
enticing sellers, which Amazon can't match, is the
opportunity to get products onto thousands of
brick-and-mortar shelves. Because you know, each store
has to get so many cases in stock. I mean it's like game
over. If you're just like a private label seller, to be
able to have your product in Walmart stores is like a
holy grail. Our product was like at one
point, the number one in the category on Walmart.com. So
we got an email from a Walmart buyer being like,
you know, would you be interested in more talks? This year for the first
time, Walmart.com sellers were given first exclusive
access to a program called Open Call, where sellers
pitch their products for space on Walmart store
shelves. Some 2,000 sellers applied. We've got a real mission to
increase assortment. So it just made sense that when
sellers are bringing high-quality assortment, we
want to make that available to our customers in our
stores or online. Walmart's huge number of
stores also makes it the undisputed king in grocery.
Amazon bought Whole Foods in 2017 and is trying to
disrupt the space by making two of them entirely
cashierless. But Amazon.com and Whole Foods each
accounted for less than 1.5% of the grocery market,
compared to Walmart's 18%. Grocery is less profitable
than general merchandise, but the real power play is
for Walmart to get customers to fill their virtual
baskets with a mix of grocery, general merchandise
and third-party items. Maybe you're shopping for
only a Walmart grocery store product, but at least that
traffic is there and it is heavy and a lot more
eyeballs on your products now. Despite big upward trends
during the pandemic, both Walmart and Amazon shares
fell sharply after Q1 earnings were reported, as
supply chain issues and increasing costs cut into
profits. But Walmart's long standing reputation as a
leader in low prices brings an advantage right now, as
customers look for deals with inflation at a new
40-year high. To save you even more,
always low prices, always Walmart. As part of Walmart's
strategy to unite more parts of its vast retail empire,
it recently combined what used to be two separate
apps: one for Walmart's own goods, primarily grocery,
and another for its third-party marketplace
products. And wherever there's
friction in that process, wherever there's two apps
and they should be one under one roof, we're now working
to remove all that friction. Walmart+, launched in 2020,
also combines benefits for loyal grocery customers with
online shopping perks. It's Walmart's answer to Prime,
which Amazon launched all the way back in 2005. Prime
now costs $139 a year for benefits like one-day
shipping on more than 15 million items, two-hour
grocery delivery in 2,000+ cities, access to Prime Day
deals and Amazon's entertainment branch: Prime
Video, Amazon Music, Prime Reading, Prime Gaming and
Amazon Photos. Meanwhile, Walmart+ members pay $98 a
year for benefits like free same-day delivery from
stores, free shipping on Walmart's own merchandise,
cashierless scan and go shopping at some stores, and
exclusive access to big sales events like Walmart+
Weekend happening June 2-5 this year. And amid
record-high gas prices, Walmart just added extra
fuel discounts for its plus members who now get between
five and 10 cents off, not only at Walmart's own pumps
but at some 14,000 participating stations
including Exxon, Mobil, Murphy and Sam's Club.
Walmart is also using its stores, and specifically
their proximity to customers, as an edge,
making big investments in speedy local delivery
programs. People are coming to us for
burgers and hotdogs, but they can buy a brand new
smoker. They can get a whole new swimsuit outfit. They
can get all of that under one roof, in one
application, in one place. And we can fulfill it for
them with great speed thanks to our footprint. Last year, Walmart launched
Express Delivery for Walmart's own merchandise
that can reach your door in two hours or less for a $10
fee, with an additional fee of at least $7.95 for
non-Walmart+ members. This doesn't include marketplace
items, but Ward says it drives traffic for those as
well. We can say to a customer:
Hey, you know, add these items that you want this
evening. But if you want that very specific item, we
can bring you that really quickly as well. Walmart has been ramping its
logistics operations since at least 2017, building 31
separate fulfillment centers devoted to e-commerce and
investing big in robotic e-commerce fulfillment,
following Amazon's lead. Also like Amazon, Walmart
has independent drivers, what it calls its Spark
Network, who handle much of the cumbersome, expensive
last-mile delivery. We can activate drivers to
come and collect items and deliver them to our
customer. But as the density grows, the cost comes down. So much so that last year,
Walmart started delivering goods for other retailers in
a program that calls GoLocal. We've announced some really
exciting clients like the Home Depot and the Chico's
and others, including small and medium businesses. And
what we're seeing is, as they share in our last-mile
capabilities, density increases and the cost for
both of us goes down. In Scottsdale, Arizona, Ward
says Walmart's completed 5,000 deliveries with Cruise
autonomous vehicles. And this vehicle turns up
like magic outside and they can grab it out of the
backseat. And then increasingly, they can put
their return in the backseat and send the car to the
Supercenter. Walmart also just announced
its expanding drone delivery by the end of the year,
deploying them from 37 stores for a reach of 4
million households across Arizona, Arkansas, Florida,
Texas, Utah and Virginia. Customers pay $3.99 for
items totaling up to 10 pounds to be delivered by
drone in 30 minutes or more. In the same way that the
store is starting to act like a fulfillment center,
they're also starting to act like a drone launch
delivery. And there's the growing
popularity of buying online and picking up curbside, a
benefit Amazon can't rival. In some of these other areas
where Amazon Prime doesn't have like the two- and
three-, four-hour delivery, but there's a Walmart store
nearby. You can be living in South Dakota or something
and you can get your product in two or three hours,
whereas on Amazon, for Prime it might take even more than
two days. While you can't currently
pick up third-party purchases at Walmart stores,
Buckley-Cox says items shipped with WFS will soon
be able to be forwarded to stores for possible same-day
pickup or delivery. And while Amazon delivers
groceries to doorsteps and some items inside doors and
garages, Walmart has a unique delivery program
straight into your fridge for $19.95 a month. It is so good for our
elderly customers that can't get out. Or if somebody has
broken an ankle or something, broken a leg,
whatever, you know. Thousands of full-time
Walmart associates like Mike Edwards spend their days
filling up a fleet of fully electric vans with groceries
and general merchandise. We don't step foot inside
the garage or the residence without this on. Then bringing it inside
people's homes and putting it away in the refrigerator.
Trusting a stranger to enter your home may sound wild,
but the program has been working well enough that
Walmart is rapidly expanding it to reach 30 million homes. All of our associates wear
cameras on their vest, and every part of the delivery
is recorded. They can't actually access your home
until we confirm that their camera is turned on and
working. And so as a customer, if you place an
order and you are curious, you can watch the full experience. InHome associates will also
take some returns back to Walmart for customers. And
Walmart is expanding the program to include alcohol
delivery and other highly requested services it's not
ready to disclose. And so they're like, oh my
gosh, you're here like, can you walk the dog? Like, can
you take out the trash? It's like, how else can you help
me? While marketplace purchases
can't currently be delivered in home, it's another way
for Walmart to build loyalty. InHome offers a unique entry
point into Walmart for a lot of our customers because we
have a pretty distinguishable offering on
the market. And now they're on our website, and they're
shopping for groceries, but they're seeing other things
they might want to buy. They're seeing things
available in marketplace. There are things that they
would never expect to see at Walmart. And so now we have
them as a loyal customer in a much more expansive and
much stickier way than we would have expected. You know, they're not going
to catch up and be 50% market share next year. But
if they continue to do the things that they're doing,
gradually they will continue to eat more and more market
share, I believe.
