Walmart isn’t using its biggest weapon against Amazon for next-day delivery — here’s what it’s doing instead

Associated Press

• Walmart is launching free, next-day delivery without using any of its 4,700 US stores.
• Instead, Walmart will fill next-day orders from its six US fulfillment centers.
• This is a cheaper and more efficient strategy than filling orders at stores, according to Walmart ecommerce CEO Marc Lore.
• Visit Business Insider’s homepage for more stories.

Walmart is using a surprising strategy to execute on free, next-day shipping that doesn’t involve any of its 4,700 US stores.

Walmart started rolling out free, next-day shipping on Tuesday. It would make sense for the company to speed up shipping by utilizing its vast network of stores, which are located within 10 miles of more than 90% of US shoppers and are often touted as Walmart’s most valuable asset against Amazon.

But none of Walmart’s next-day orders will ship from stores. 

Read more: Walmart blows Amazon out of the water with its own free, next-day delivery

Instead, Walmart will fill next-day orders from its six US fulfillment centers. This is a cheaper and more efficient strategy than shipping orders from stores, according to Walmart ecommerce CEO Marc Lore.

Here’s why: 

Each next-day order will ship from a single fulfillment center, which is cheaper than shipping orders in several boxes from multiple stores or distribution facilities, Lore told Business Insider. (As a result, customers will have access to next-day shipping only for items that are stored at distribution centers closest to them).

Walmart plans to further drive down the costs of next-day shipping by making "aggressive investments" in automation and boxing technology, and fulfillment centers are better equipped for those kind of investments, he said.

Shipping from fulfillment centers also prevents stores from becoming crowded with order pickers and packers. 

"Most of the picking capacity in the store is being utilized for same-day pickup and same-day delivery," Lore said. 

Read more: Walmart and Kroger are rethinking stores as the online grocery battle intensifies

Walmart is already considering adding separate fulfillment stations to its stores to avoid impinging on customers’ in-store shopping experience.

While Walmart won’t be using its stores for next-day shipping, the company will continue leveraging them in its battle against Amazon, particularly when it comes to same-day pickup and delivery.

"Walmart’s biggest advantage is definitely the fact that we have 4,700 stores within 90% of the population, and in those stores we have 100,000 products and fresh and frozen items available for either pick up for free or delivered same-day," Lore said.

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SEE ALSO: Forget one-day shipping: same-day is the ‘real battleground’ where Amazon, Walmart, and Target, are sparring

Source: Business Insider – hpeterson@businessinsider.com (Hayley Peterson)