Analysis: Walmart’s new pickup discount
Walmart recently announced that, starting April 19, it would order a discount on select items that are ordered online and then picked up in the store. Here is commentary on what the new initiative means for Walmart in terms of last-mile delivery as well as its competitors.
“Last-mile delivery makes up 28% of the costs of delivery alone. Walmart knows this all too well and is turning to buy online, pickup in store (BOPIS) to reduce this costly expense with its new Pickup Discount program. Not only is the company reducing the hit to its profits by minimizing its delivery costs, but Walmart is further setting themselves apart from Amazon by connecting its purchase data across all channels and utilizing its physical stores to its advantage as local distribution centers – something Amazon is not in a position to do.
Furthermore, Walmart is driving the online shopper into the physical store, where they are well positioned to drive incremental sales. The DynamicAction Retail Index shows an increase of 138% in orders using express shipping so far in 2017 compared to 2016 – meaning that more than ever, consumers are willing to pay to get their packages now.
Walmart’s Pickup Discount program allows consumers to get their package when they want it and to save money. This is a win-win for the consumer and a strategic advantage for Walmart as they begin to sync their Jet.com acquisition to calculate these savings for customers and distance themselves from Amazon by better leveraging their unique physical store footprint.”
– Sarah Engel, chief marketing officer, DynamicAction
“Through this move Wal-Mart is answering consumers’ call of convenience when it comes to their fulfillment options as well as building their customers’ loyalty by rewarding them with select discounts if they choose to buy online and ship to a local store. It’s a win-win for Wal-Mart as they continue to provide an array of fulfillment options yet utilize BOPIS to drive in-store traffic and make their physical store the hub for their entire retail operation.
It also offers consumers a new way to receive online-only items previously only available through ship-to-home fulfillment. A recent Kibo study asked 3,000 consumers what they look for in terms of fulfillment and their answers were highly correlated with overall convenience for the consumer. For example, survey respondents answered that saving on shipping costs overtook getting the product at the time the consumer wants as the #1 reason for using BOPIS. However convenience and saving time are still top reasons.
Additionally, nearly half of consumers said they will remain loyal to a retailer if buy online, BOPIS is available and 66% said providing multiple fulfillment options such as BOPIS, would drive them to complete their purchase. At the end of the day it is about convenience for the consumer and Wal-Mart is doing its part to amp up its strategy to adhere to this need.”
– Tushar Patel, chief marketing officer, Kibo
Washington Spotlight: Retail Caught in the Middle – Here We Go Again
With healthcare reform appearing to be placed on the back burner – at least for now – attention in Washington, D.C. is turning to corporate tax reform. Corporate tax reform is much sticker issue and many of the political dynamics that doomed the healthcare effort seem to be falling into place in much the same way in this conversation. And that could be a real problem for retail operators.
A critical component to the Trump-Ryan tax plan is the Border Adjustment Tax (BAT) that would tax imports at a proposed rate of 20 percent while exempting exports from taxation. Proponents argue that it would re-invigorate domestic manufacturing and make our products more competitive overseas.
Critics say it would significantly raise prices on thousands of domestic goods, disproportionately hurting lower income consumers – many of whom are a critical part of the Trump electoral coalition. Generally speaking, retailers are supportive of tax reform but have major issues with the BAT as it stands today.
Conservative groups backed by the Koch Brothers as well as the Club for Growth take issue with the BAT as well, and are gearing up to fight it. The problem for President Trump and Speaker Ryan is that this is same dynamic that doomed health care reform. And this fight won’t nearly be as tough.
Once again, retailers find themselves in the middle of a Republican civil war. That is becoming familiar territory for the industry. The tax nexus issue between online and bricks and mortar retailers split the party; as did the ongoing tussle with the banks and credit card companies over interchange fees; as did immigration reform; as did health care reform.
Here we go again – this time on tax reform. Retailers just cannot seem to avoid getting caught in the squeeze. Constantly being the political football in an ongoing intra-squad scrimmage is putting our brands and business models in the public spotlight in unprecedented ways.
There was hope in the industry that the election results would be a harbinger of good things to come and companies would have political and policy opportunities to grow their businesses. But at least for now, instead of seeing green, operators are still seeing red.
Joe Kefauver is managing partner of Align Public Strategies, a full-service public affairs and creative firm that helps corporate brands, governments and nonprofits navigate the outside world and inform their internal decision-making. Align specializes in service sector industries.
Washington Spotlight: Recess Isn’t So Fun Anymore
With Congress in recess this week, legislators can finally take a break from the grind of D.C. politics – fighting with the other party, fighting with their own party, and of course, the spotlight of a relentless national media. But in a lot of cases, members may have it better in D.C. than back home.
Many of them return to disgruntled constituencies which are showing up in record numbers to town hall meetings, community events and other forums to blast members of Congress on issues all over the political landscape – healthcare, taxes, immigration, the environment and many others. For Republican members in particular, this is their first trip back to their districts since the healthcare debacle and they are preparing themselves for the wrath that is sure to come.
Moderate Republicans in the Northeast and Midwest are going to get slammed for not standing up to the Freedom Caucus “bullies” and letting an opportunity to repeal and replace Obamacare slip away.
Conversely, staunch conservatives will be forced to endure a verbal beat down by chamber of commerce-types for killing a repeal while being applauded by Tea Party activists for “staying the course.” And that’s just on the healthcare issue. Taxes and immigration will be front and center as well.
RETAIL: For retail operators, the tone and tenor of these meetings during the congressional recess could determine how ambitious Congress is when it is back in session. Either they come back with a renewed vigor to tackle some of the most pressing problems for employers – reasonable healthcare reform, a more competitive corporate tax system and some tough decisions on trade – or they are so beaten down that they fear the political backlash of even minor changes in policy.
While elected representatives and senators are back home in their districts, operators need to get out of their stores to make sure their voice is heard – that protecting job creators needs to be at the top of Congress’s priority list.