A new Wal-Mart commercial features a loving dad buying his daughter a bike online, and dropping by a Walmart store to pick it up on his way home. Wal-Mart (WMT) has offered store pickup for online purchases for years, but the new marketing is part of a broader push for same-day pickup, as the nation’s largest retailer tries to compete more directly with Amazon’s shipping offers.
If you want something right now, the logic goes, you can pick it up yourself, without having to hunt the aisles. But the strategy faces some big, annoying hurdles.
“At Wal-Mart, you pull into a giant parking lot with a million people and wait in line... It’s a mess,” points out Kevin O’Marah, head of research for the supply research firm SCM World. “It’s like going to the DMV.”
And that’s on a normal shopping day. Add the insanity of Christmas to the mix, and same-day pickup, on the face of it, will have limited appeal compared to doorstep delivery from Amazon (AMZN), which is often free, and is both free and fast for about 40 million Amazon Prime members.
“Omnichannel” has been the buzz in retail for years, as old-line brick and mortar shops attempt to better link physical stores to their digital operations. Customers who shop both online and in-store buy more overall, and B&Ms have tried to leverage their existing resources into e-commerce—for instance, by putting retail and online inventories into shared systems to improve fulfillment.
But melding bricks and clicks has proven to be a huge challenge. Pushing same-day pickup is, according to Greg Kefer of GT Nexus, something of an admission of defeat.
“[There’s] a growing consensus that profitable omnichannel retail is not achievable right now. Retailers lack the infrastructure and agility on the back end to deliver inventory across channels.”
MORE: Here’s why Walmart won’t discount holiday shipping
O’Marah says at least some retailers are getting the omnichannel experience right — mostly high-end shops like Macy’s and REI. They provide very fast in-store service, and inviting retail spaces more likely to encourage customers to browse. But Wal-Mart’s baseline infrastructure makes doing that hard.
“You’ve got low-paid people, in a store footprint that wasn’t designed to support it,” says O’Marah. “[And] if it’s anything less than lightning quick, [customers will be] pissed off right away.”
Those negative experiences (some of which are already making the rounds online) could turn off shoppers long-term. Wal-Mart has signaled some awareness of that risk, telling Coins2Day last month that it was raising wages and improving its store experience.
But even when it works smoothly, same-day pickup presents deeper structural issues. Wal-Mart’s online prices are often lower than their in-store prices, but store pickup might actually cost Wal-Mart more. Online purchases are picked right off the store shelf—where another employee has already been paid to put them.
“Your entire business is built on those [in-store] margins,” says O’Marah. “And now you’re adding additional labor, additional inventory.”
Wal-Mart could be taking a loss on pickup purchases, then, with a long-term eye towards heading off online competition. With e-commerce still (amazingly) only about 6% of U.S. Shopping, there’s plenty of turf left to fight over.
There’s at least one way the strategy could become a win — if online pickup customers buy more once they’re in the store. In many Walmarts, online pickup counters are in the rear of the store, which will guide shoppers past other potential impulse buys. On the other hand, that’s also more customer time and hassle — and more reason to just buy from a pure e-tailer in the first place.
The markets seem to have already made up their mind about Wal-Mart’s future. Amazon’s stock has more than doubled over 12 months, while Wal-Mart has taken a sustained drubbing, losing an equally astonishing one-fourth of its value over 12 months.
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