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Walmart Shifts its Focus From Store to Distribution Growth

Walmart Shifts its Focus From Store to Distribution Growth

Thursday, October 6th, 2016

Could the key to taking on the Amazon retail powerhouse be as simple as expanding its distribution power? It looks as if this is the strategy that rival Walmart will take up in order to take on the competitive e-commerce market.

In an article with USA Today, Walmart revealed it would be scaling back the number of stores it plans to open in the U.S. over the next three years to 230 openings in 2016, 130 in 2017, and just 55 in 2018. Instead, the company’s Vice President of E-Commerce Supply Chain, Justen Traweek, told Reuters it will double the number of its online sales warehouses, reaching 10 before 2016 is through. Prior estimates pinned the number at just 8 by the end of 2017.

These warehouses may be the most effective strategy for the retail giant to grow its e-commerce revenue, suggests The Consumerist. With large distribution centers come large product stocks, reduced shipping times, and cut shipping prices—all recipes to providing more value to consumers at lower prices. 

Justin Traweek, Vice President e-Commerce supply chain, Walmart (Photo Credit: Harry Fisher / The Morning Call)

“We have doubled our capacity in the last 12 months and that allows us to ship to a majority of the U.S. population in one day,” Traweek adds in his interview with Reuters.

This shift in strategy comes just after Walmart announced an over $3 billion acquisition of e-commerce company According to a report by USA Today citing Moody’s Investor Service, Walmart gets about $14 to $16 billion of its sales through online business. While this maybe isn’t a substantial chunk of Walmart’s overal sales as of yet, CEO Doug McMillon told the news source that he expects that to start to change in the near future.

Doug McMillon, President and CEO, Walmart

“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail,” McMillon said. “Our customers want us to run great stores, provide a great e-commerce experience, and find ways to save them money and time seamlessly—so that’s what we’re doing.”

With these warehouses planned to be built before the year is through, we may see a boost in sales results as soon as next year. Watch for more coverage from Deli Market News as the retail power grab continues.