Walmart’s Future of Fulfillment is Built Around Walmart+

Need to Know

• Walmart is prioritizing the development of new fulfillment facilities and increasing the fulfillment capacity of existing stores, as e-commerce remains a cornerstone of the retailer’s strategy.
• These plans are directly connected to Walmart+, the membership platform launched in 2020 that competes with Amazon Prime.
• Walmart Fulfillment Services is currently used by approximately a thousand sellers on Walmart’s online marketplace.

Need to Know

Walmart has outlined its fulfillment plans as the retailer thinks beyond the pandemic, emphasizing the growth of its proprietary Walmart Fulfillment Services as the company continues to compete for customer loyalty with Amazon.

In 2020, Walmart pivoted many of its stores towards fulfillment as in-store shopping to a backseat to e-comm. Walmart’s e-commerce sales in the U.S. contributed 5.4% of comparable sales last year, which includes purchases that were made online but fulfilled by brick-and-mortar stores. The company is now stepping up, outlining plans to build new fulfillment centers and better position its stores to continue to fulfill online orders while promoting the use of Walmart Fulfillment Services (WFS) to its online merchants.

WFS is a key cornerstone of Walmart’s future digital strategy since its use will better-position the retailer’s loyalty program, Walmart+, to compete with Amazon Prime. Currently, only merchants who subscribe to WFS can offer shoppers free next-day shipping through Walmart+; the more merchants using WFS, the more customers will have access to free shipping, and the more attractive Walmart+ will become.

As Walmart continues to build Walmart+, increased fulfillment and capacity investments, in addition to new member benefits over time, position the retailer’s membership program to better compete against Prime.

Walmart’s plans to bolster its fulfillment capacities come as the company’s CEO, Doug McMillon, said in a letter to shareholders that he believes the spike in e-comm brought on by the pandemic is not likely to subside once the pandemic ends. “The market has experienced outsized growth in online shopping since the beginning of the pandemic, and we believe this trend will continue,” he said. “We’re broadening the scope of products and services we offer to increase relevance in more customers’ lives while layering in a more robust digital experience to improve engagement.”

Improved fulfillment has been on Walmart’s roadmap for some time. Walmart invested more than $11 billion in e-commerce, supply chain, and technology in the US over the last two years. In 2020, the company unveiled ambitious plans to begin remodeling its physical stores to focus on the digital experience; in Canada, the company invested $110 million in online-focused physical upgrades, partly to improve upon existing in-store fulfillment capacities. And in October, the company announced it was turning four of its stores into e-commerce labs, to test new ways of using its existing physical footprint to better fulfill online orders.