Walmart, Target, and Amazon are deeply invested in the shipping wars, a strategic maneuver acknowledged by retail experts as crucial for maintaining a competitive edge against low-cost Chinese retailers Shein and Temu. In the case of Walmart and Target, their financial dedications are also focused on narrowing the gap in delivery speed with Amazon, which stands as the benchmark for swift shipping and remains the undisputed leader in speed.
Under its updated distribution model, Amazon has significantly accelerated the delivery of packages to Prime customers’ doorsteps this year. The new approach involves dividing the country into eight regions and predominantly dispatching items from warehouses within those specific areas. Amazon’s rationale behind this strategy is to reduce shipment distances and minimize touchpoints, thereby not only expediting deliveries but also effectively reducing operational costs.
Previously, the fulfillment of orders by the Seattle-based e-commerce giant involved warehouses scattered across the country. As of July, the company disclosed that 76% of customer orders were now being fulfilled within their specific regions, a notable uptick from the previous figure of 62% before the implemented change.
“We remain on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history,” Amazon CEO Andy Jassy said in October during an earnings call with analysts.
Company executives highlight that the acceleration in shipping speed is also a result of Amazon’s expansion of same-day delivery, initially launched in 2015 for Prime members subscribing at $139 annually for free two-day shipping and other perks. These same-day delivery sites are compact warehouses located in metropolitan areas, primarily stocking the top 100,000 products in demand. Currently, Amazon boasts 55 of these sites nationwide, with plans to double the number in the coming years, as revealed by Sarah Mathew, the Vice President of Delivery Experience at Amazon.
“Psychologically, fast delivery is very important to the consumer when ordering online,” said Neil Saunders, managing director of GlobalData Retail. “That is why everyone is trying to push out more into this space even though it’s very expensive to support and it often requires a lot of new infrastructure.”
In an effort to catch up, Walmart and Target are investing substantial funds in upgrading warehouses, establishing new facilities, and undertaking various initiatives aimed at cost reduction.
Utilizing over 4,000 of its nationwide stores as fulfillment centers and delivery hubs for online orders, Walmart has incorporated a strategy to enhance order processing and expedite deliveries to customers. In November, the company announced plans to introduce 40 additional “parcel stations” in stores across nine states by the year’s end. These stations, functioning akin to mini post offices for receiving and delivering packages, were set to operate prominently during the holiday season, according to the nation’s largest retailer.
At the same time, the Bentonville, Arkansas-based company is actively engaged in transforming its warehouses through automation, with the goal of expediting the delivery process to both stores and customers.
Walmart is pursuing this initiative through diverse approaches. It is implementing automation across all 42 of its regional distribution centers, which store non-perishable items and dispatch goods to replenish stores. Additionally, the company is constructing four automated warehouses specifically designed for handling perishable items. Moreover, there are plans to incorporate over 100 smaller facilities connected to its stores, with a focus on managing online orders.
Since last year, Walmart has launched its first three fully automated “next generation” fulfillment centers. These centers house a broader selection of highly sought-after items, streamlining the packing and shipping process from 12 steps down to five. The company asserts that these hubs, in conjunction with modifications to its transportation network, have led to a significant “drastic increase” in the volume of orders eligible for next-day shipping. Walmart’s overarching aim is to double the daily fulfillment of customer orders and extend next- and two-day shipping coverage to nearly 90% of the United States.
Meanwhile, Target has set its sights on enhancing shipping speed by bolstering its own warehouses, referred to as sortation centers, through a previously announced $100 million investment earlier this year.
Packages for online orders are received at sortation centers from 30 to 40 nearby Target stores. At these centers, the packages undergo sorting, batching, and routing processes for delivery to local neighborhoods through either a third-party carrier or Shipt, a company owned by Target. Anticipated to double their delivery volume, these warehouses are expected to handle more than 50 million packages this year.
