Walmart Teases One-Day Free Shipping in Response to Amazon
(Bloomberg) -- Is Walmart Inc. taking on Amazon with one-day free shipping?
The retail giant appeared to be taking a jab at its rival with a tweet on Friday, teasing one-day free shipping without a membership fee.
Amazon.com Inc. said it would spend $800 million in the current quarter to reduce delivery times for top customers to one day from two -- sending Walmart shares slumping 1.9 percent to $101.53 at the close, the most in two months. Amazon jumped 2.5 percent to the highest in almost seven months as several analysts raised their price targets after the announcement.
Walmart could easily match Amazon’s one-day delivery gambit, according to an analyst who previously worked at the world’s largest retailer.
“One day shipping is neither shocking nor difficult for retailers at scale,” Brandon Fletcher, an analyst at Sanford Bernstein, said in a note Friday.
Fletcher, who previously worked in Walmart’s strategy and operations departments, said the retailer’s existing network of 156 distribution centers, combined with the fact that much of the U.S. population is concentrated in urban areas, means that it wouldn’t require much investment to build out a one-day service. He cited previous research conducted by consultants A.T. Kearney -- where Fletcher also briefly worked a decade ago -- that showed Walmart could get to one-day shipping with only eight additional distribution facilities.
Walmart has offered free two-day shipping on orders of $35 or more since early 2017, helping it keep pace with Amazon, which accounts for about half of all e-commerce spending in the U.S. The $35 threshold has been adopted by other retailers, as well, in order to offset the delivery costs. Some retailers, like Target Corp., temporarily ditched the requirement during the holiday period in a bid to lure shoppers.
Retail transactions with free shipping increased about 13 percent in North America last year, and rose 8 percent through April 15 of this year, according to DynamicAction, an analytics firm.
Amazon Prime, the subscription program that helped make the company the world’s largest online retailer, charges customers monthly and annual fees -- typically $119 in the U.S. In return, Prime customers get shipping discounts and access to music and video programming. It offers free two-day delivery on many items.
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