Traditional brick and mortar retailers Walmart and Target are a step ahead of Amazon in the delivery battleground: while Amazon is offering 1-day delivery Walmart and Target are already moving to same-day.
That’s according to retail equity analyst John Zolidis.
“It may be tempting to think that Amazon investing $800 million to move its Prime offer of 2-day shipping to 1-day delivery will put incremental pressure on large retailers,” he says. “However, this move is not a surprise. We spoke with Wal-Mart (WMT) CEO Doug McMillon about this in October last year. He told us that same-day delivery, not 1-day delivery, was going to be the real battleground.”
McMillon is right. As was discussed in a previous piece here something has changed in the retailing industry in recent years.
Instead of fading away into the archives of history, brick and mortar retailing has come back to complement and support on-line retailing. Shoppers are placing orders online and are picking up merchandise at neighborhood stores, saving time and avoiding shipping fees.
That’s especially the case for groceries, where speed of delivery is a crucial factor in maintaining freshness.
The merging of online retailing with traditional retailing has provided an advantage to retailers with extensive neighborhood store presence like Walmart and Target. “Both WMT and Target (TGT) are already at a huge advantage over AMZN in this respect — because both retailers already have product stored within a short driving distance of the vast majority of the U.S. population in their respective 1,000’s of stores,” notes Zolidis. “Further, both retailers are offering not just delivery (Target already has same-day delivery via Shipt) but various options for BOPIS (buy online pickup in store).
Then there are pick up points to enhance convenience. “WMT now has pickup towers in-store and are installing these across the chain, and it has established drive-through pick-up grocery lanes and is continuing to add these at a rapid pace,” adds Zolidis. “Target is offering similar services and installing dedicated counters for customers to more conveniently grab items on the way home from work or after picking up kids from school. Target will also bring pre-ordered items out to your car in the parking lot.”
The strategy has been paying off. The two retailers have reported a rebound in both online sales and retail sales in recent quarters.
Simply put, Walmart and Target have changed the game in the retailing industry. And they have brought Amazon back into the world of the neighborhood store it once sought to eliminate by acquiring traditional retailers like Whole Foods — and by planning to open more grocery stores around the country to cater to markets not served by Whole Foods, as recently announced.
That’s why Zolidis thinks that investors would be making a mistake selling Walmarts and Target’s shares at this point.
“In our opinion,” he concludes, “it would be a mistake to sell large retailers on this announcement (WMT & TGT) as they have anticipated this for some time and are already rolling-out corresponding services.”
My recent book The Ten Golden Rules Of Leadership is published by AMACOM, and can be found here.