There is a subtle, but important, reveal in the article “The math is looking good for Walmart's automated warehouses” from Business Insider, June 13, 2024.
“As Walmart's distribution-center and fulfillment-center capacity increases, it's starting to exceed the inventory Walmart actually owns, Rainey said.” [John Rainey, CFO]
My read: This is strategic, not inadvertent. Walmart is proactively creating and allocating an increasing portion of distribution-center space to Walmart Marketplace.
Walmart Marketplace, like Fulfillment by Amazon (FBA), enables qualified third parties to list/sell products on walmart.com. Marketplace orders are fulfilled by Walmart via Walmart’s warehouse/distribution network.
"It gives us the opportunity to use that space for our third-party providers," the CFO [John Rainey] said. "A very exciting part of what's changed in our business over the recent quarters is the number of three-P sellers that are availing themselves of Walmart fulfillment services."
My read: The increase in third-party providers (three-P sellers) relationships on Walmart Marketplace is also strategic. Walmart is aggressively cultivating third-party provider relationships.
“The cost of picking is coming down, the density of last-mile delivery has improved, so therefore the cost per unit continues to fall."
My read: The cost of picking is down because of increased automation of Walmart’s distribution-centers. The density (number of deliveries and items per delivery) of the last mile has improved because of increasing sales volume on walmart.com (including Marketplace items). The last mile is a significant portion (often more than 50%) of the total transportation cost of ecommerce.
My overarching takeaway (speculation on my part) is that a key strategic objective in Walmart’s near and long-term strategic plan is to significantly increase third-party provider relationships. This signals to me that Walmart is preparing to aggressively challenge Amazon’s dominance in ecommerce. It’s going to be interesting to watch. What do you think?
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