Walmart knows its customers. It has to. Otherwise, they wouldn’t be the largest retailer in the U.S.
But digital retail is an entirely different beast from physical retail. And digital retail has historically been an area where Walmart lagged behind. But that changed earlier this year when the Arkansas-based titan reported a 74 percent increase in online sales for the first quarter of 2020, prompted in no small part by the Coronavirus pandemic. By comparison, Amazon's sales for this year’s first quarter were only $75.5 billion; a 26 percent increase from the first quarter of 2019.
A one-time fluke? Perhaps. But Walmart has always had its eyes on the digital prize commanded by Amazon. A prize worth $280.5 billion in 2019. And their persistence apparently paid off. A recent poll from First Insight indicated 55 percent of consumers surveyed prefer shopping at Walmart over Amazon. That doesn’t indicate Amazon is on its way out anytime soon. But it means Walmart’s price advantage is gaining traction.
Earlier this month, Walmart announced their formal partnership with Shopify—one of the leading eCommerce platforms for third party sellers used by well over one million businesses—in a bid to increase their share of the overwhelmingly competitive digital retail landscape dominated by Amazon. And investors took notice. Shopify’s shares increased by 7.1 percent immediately following the announcement, heralded by the likes of Forbes magazine as a “stroke of omnichannel genius.”
Except it isn’t necessarily. Earlier in May, Shopify previously established a formal partnership with the recently announced launch of Facebook Shops to help sellers establish customized storefronts via Instagram and Facebook.
All of this may be excellent food for thought for investors. thought for investors. But what does it mean for sellers?
An Advantage For Shopify Sellers?
Shopify may have over one million sellers currently using its platform. But only 1,200 will be eligible to take advantage of Walmart Marketplace—specifically those which have a proven “track record of exceeding customers’ expectations” and whose products align with Walmart’s reputation. Those few that are eligible will gain access to a robust online audience reportedly in excess of 100 million unique customers per month.
That sounds like a plus for any small or medium sized business. And that’s the target business audience Walmart promises will benefit from the partnership. But a closer examination of just who’s selling on Shopify includes the likes of Hasbro, Crabtree & Evelyn and Tesla—companies whose products exceed customer expectations. It’s been estimated that larger businesses account for close to a quarter of Shopify’s annual sales. And given Walmart’s promise of providing customers with rock bottom prices, the likelihood of the partnership being strictly limited to small businesses isn’t likely to be all that high. Which means if you’re a smaller Shopify seller competing against big draw brands, you may have to face a much lower profit margin; something few small businesses can afford.
But there’s an even bigger problem with this stroke of “omnichannel genius.” It’s the potential for channel restriction being limited to Walmart. Walmart doesn’t currently offer multi-channel fulfillment (MCF.) In fact, they tend to frown on users selling through multiple channels and actively prohibit sellers using Amazon’s MCF. Amazon in return has been known to penalize users offering lower prices on competitive channels—Walmart, in particular. It’s a Catch-22 your business may not be prepared to ponder.
A Proven Track Record Of Partnership With Walmart?
2016: Walmart enters into a partnership with Uber and Lyft to provide grocery delivery services to compete with Amazon. The partnership with both companies was dissolved two years later in order for Walmart to focus on their other delivery solutions.
2016: Walmart acquires Jet.com for $3.3 billion in an attempt to focus their online strategies towards a younger, city-dwelling audience. Four years later, Walmart announced it would be discontinuing the Jet.com brand, indicating the acquisition was “critical to accelerating our omni strategy."
2017: Walmart acquires highly successful apparel retailer Bonobos for approximately $310 million. The company continues to be successful, despite highly publicized corporate departures and layoffs.
2017: Walmart announces the acquisition of Parcel, a New York-based logistics solution specializing in the same day delivery of perishable and non-perishable items. The acquisition proves successful for Walmart, despite the service being limited to the greater New York City metro area.
2018: Walmart partners with Google backed startup company Deliv in another attempt to compete with Amazon’s grocery delivery solutions. Less than a year later, Deliv dissolves the partnership, with sources claiming Walmart was unable to process orders quickly enough. Walmart would eventually develop their own proprietary delivery solution known as Spark.
Can Your Shopify Store Succeed With Walmart?
Chances are, yes. Walmart doesn’t just have name recognition. Their customer service and order fulfillment solutions are well-established. They have a highly visible and increasingly loyal customer base, and maintain an annual revenue which has exceeded expectations year over year.
But you will have to take into account Walmart’s limitations. Their customer base is loyal primarily because of Walmart’s price advantage; except the advantage is primarily for its customers, and not necessarily its merchants.
For another, Walmart has a seller vetting process which isn’t just notoriously slow. It can also be confusing and intricate, with merchants sometimes waiting well within excess of a month before receiving confirmation of their approval. And if you have yet to exceed customer expectations on Shopify (by whatever vague yardstick Walmart will use), you may find exclusively selling through their omnichannel strategy to be an uphill battle.
We’re fully aware that eCommerce isn’t just a highly competitive landscape by default. In many ways, it needs to be. It’s still relatively young compared to its physical counterpart; a counterpart which Walmart proved highly adept in dominating. What we’re suggesting is to review the options that make sense for your brand growth. Piggybacking on Walmart’s shoulders can get you there—but it comes at a certain price.
Just be sure the price is to your advantage.
Color More Lines provides white glove, global account management of your eCommerce platforms so mission-driven companies can focus on new product development, branding and growth strategies. Find out more at Color More Lines.