When Walmart bought Jet.com, it was clear that its ecommerce operations would change. In the latest shift, it has redefined what it means to be “out of stock,” by limiting online orders according to the expense of shipping the items, not just their physical availability.
Previously, Walmart would ship ordered products from warehouses all over the country, regardless of the cost. Customers might receive multiple packages, each coming from a different distribution center, and they could obtain even heavy, bulky items without any hindrance, as long as those items were somewhere in Walmart’s inventory. But no longer. Now, if a bulky item is only present in a warehouse in California, a shopper in Massachusetts likely will receive notice that the product is out of stock and unavailable for purchase.
At the same time, Walmart encourages vendors that sell through its system to increase the stocks they make available, so that it can spread the products out and make them more consistently available. For consumers, it attempts to mitigate any frustration by rapidly suggesting product alternatives that likely will meet their needs. A website shopper searching for turkey-flavored cat food probably will accept a shipment of chicken-flavored chow just as readily, so Walmart believes it has not hindered purchasing opportunities substantially.
Still, some vendors complain that they have suffered diminished sales. The new policies are unlikely to change back though; Walmart has indicated that it must reduce the costs of shipping for its ecommerce arm to be profitable. A key to this effort is to rely predominantly on ground shipping, instead of air shipping. But if it wants to get products into customers’ hands quickly (which it must do if it wants to compete with Amazon), then it needs to have those products located in close proximity to the customers, to be able to ship them over the roads.
Discussion Questions:
- How does the change in transportation strategy affect the financial ratios in the strategic profit model in Chapter 6?
- What will be the impact on the total inventory of a particular SKU, if it is stocked in multiple Walmart locations instead of just one?
- How does the change in transportation strategy affect customer service perceptions and loyalty?
- How does this change in Walmart’s transportation strategy compare with that of Amazon?
Source: Sarah Nassauer, The Wall Street Journal, August 31, 2018