business news in context, analysis with attitude

The Wall Street Journal reports this morning that Walmart "is building a pair of dedicated warehouses to handle Internet orders and speed up shipments, its latest move as it tries to catch up to online rival Amazon.com ... The two new fulfillment centers—one of which opened this month in Ft. Worth, Texas, and will handle the upcoming winter holiday load—will allow Wal-Mart to get millions of additional items to customers faster and cheaper, said Joel Anderson, president of Walmart.com."

The second warehouse is scheduled to open next year in Bethlehem, Pa., and will "put Wal-Mart within a day's haul of a third of the shoppers in the U.S. and Canada."

The Pennsylvania facility, the story notes, is just "10 miles from Amazon's own Lehigh Valley warehouse operations."

The facilities, the story says, are designed to address what Walmart believes has been one of its handicaps in competing against Amazon: "Wal-Mart's online sales aren't growing faster in part due to difficulties in figuring out how to efficiently and economically deliver products into the hands of online shoppers. It is an unfamiliar position for a company that muscled its way to retail dominance by creating an unrivaled logistics and distribution system that helped it relentlessly push down costs."

While Walmart is a much bigger company than Amazon, its internet operations do not compare. Walmart's online sales were about $7.7 billion in 2012 and are projected to reach $10 billion this year; Amazon's total sales, all online, were $61 billion last year. And while until now Walmart has had only one dedicated warehouse to deal with e-commerce orders, Amazon has more than 40 facilities spread across the country as it positions itself to offer most of its customers same-day or next-day delivery.
KC's View:
I continue to believe that this will be a big challenge for Walmart. Hardly insurmountable, but big. And that's simply because the company has so many legacy issues to deal with, which Amazon does not have. Walmart will have both internal and external battles as it struggles to master the e-commerce space.