Walmart is about to implement its latest strategy to better compete against Amazon. The world’s largest retailer announced Wednesday that on April 19, shoppers can start earning discounts on 10,000 online-only items if they opt to pick up their orders in-store. By June, Walmart plans to expand the offer to more than 1 million items, with discounts varying based on an item’s price and size.
The service is officially named Pickup Discount, and it’s essentially Walmart’s implementation of Jet.com’s “basket economics” strategy. In a nutshell, basket economics is an e-commerce ops strategy that stresses logistics and supply chain to reduce costs.
The idea is to figure out the optimal way to ship a basket of goods to a consumer, at the lowest cost, and to make that process transparent to the consumer as they’re shopping. Jet turned this into an algorithm that powers its Smart Cart digital shopping cart.
For Walmart, the hope with Pickup Discount is to lure shoppers into stores on the chance that they’ll buy a few more things while they’re inside. It’s also a way to cut down on last-mile delivery costs, which tend to be the most expensive part of online order fulfillment.
However, there is chance that this strategy could backfire on Walmart if the discounting gets too broad.
According to Nick McLean, CEO of order management software provider OrderDynamics, Walmart’s pickup discount “will only work to the company’s advantage if they use the discount sparingly.”
“The discount should be an incentive to get shoppers in the door and drive additional sales,” he said. “By over discounting or offering the promotion on too many items, Walmart may end up losing profit margins on both online and in-store purchases.”
It’s worth noting that Walmart’s new discounting model will only apply to items that aren’t available in Walmart’s stores. Still, the effort is a significant move on the part of Walmart as it continues its aggressive price war against Amazon. It’s also one of the more significant attempts Walmart has made to leverage its massive brick-and-mortar infrastructure to support its e-commerce business.