Walmart doesn’t just want to be the biggest brick & mortar seller in the world – they know that eCommerce is the way of the future.
According to webretailer.com, Walmart.com is a relatively distant 3th in US visitors behind Amazon and eBay, but it’s closing the gap with a huge growth rate.
In their efforts to catch up, Walmart is launching programs aimed at ensuring that their delivery experience can match the vaunted Amazon Prime. Last year, they launched Walmart Fulfillment Services, a new program that enables sellers to store inventory and ship through Walmart’s fulfillment centers.
In this article, we’ll cover how WFS works, it’s strengths and weaknesses, and alternative solutions for sellers that want to deliver fast and free on Walmart.com.
How does Walmart Fulfillment Services work?
At its core, Walmart Fulfillment Services is a competitive answer to Amazon Prime. The single most important element of competing with Amazon is earning parity on fast and free shipping. Without fast and free shipping, Walmart knows that customers will continue to turn to Amazon. The more quickly Walmart can grow WFS and get its sellers to use the network, the better its 2-day shipping coverage will be.
Sellers that use Walmart Fulfillment Services for their Walmart listings go through a relatively simple and hands-off process. Once a seller has an account and listings, and the seller is approved for Walmart Fulfillment Services, then they send inventory to Walmart fulfillment centers and convert their products to Fulfilled by Walmart listings.
If they didn’t have it already, they’ll then get the Walmart TwoDay badge, boosting impressions and conversion. Then, when a customer places an order, Walmart will pick, pack, and deliver the item – no intervention needed from the seller. Moreover, Walmart also manages the returns process and provides customer service.
Benefits of Walmart Fulfillment Services
Straightforward solution for Walmart
Simply put, sellers that use Walmart Fulfillment Services for their Walmart orders have a low-complexity solution. There aren’t complicated integrations to worry about, and management tools are available through the seller’s account with Walmart.
Enables fast shipping
Since Amazon introduced its Prime program, 2-day shipping has quickly evolved from a “nice benefit” to a “must have”. In fact, a recent McKinsey study found that over 90% of consumers see 2- to 3-day delivery as the baseline. Without it, your offer will see high cart abandonment as shoppers select it, then realize that it doesn’t come with the delivery service they expect.
Walmart Fulfillment Services powers fast and free delivery by automatically enrolling products into the Walmart TwoDay program. Walmart’s studies have shown the program to boost conversion by 30-50% – a massive revenue increase.
Handles customer service
Walmart handles all customer inquiries, refunds, and returns for products sold through WFS. In addition to the TwoDay tag, in fact, WFS products get “Free & Easy Returns” and “Fulfilled by Walmart” tags, which further increase visibility and conversion.
When it comes to your time, WFS saves you a lot of time by handling customer service. As we’ll handle in the next section, though, there’s a drawback to the “Free & Easy Returns” tag.
Drawbacks of Walmart Fulfillment Services
Point solution that doesn’t work elsewhere
Just like Amazon FBA and other marketplace solutions, Walmart Fulfillment Services works only for Walmart. You likely know already that the best sellers don’t put all their eggs in one basket – they list across multiple marketplaces and often have their own webstore as well. So if you’re one of those top sellers, WFS is only a partial fulfillment solution.
The benefits of Walmart Fulfillment Services as a simple solution for selling on Walmart fade away when you have to manage alternate fulfillment platforms for other selling channels.
Amazon FBA sellers already are well acquainted with the flipside of easy returns – you may not have to worry about it when a customer calls in a return, but you’ll definitely be worrying about it when you realize how big of a hit your margin is taking. A 5% return rate already sounds like a big issue – but it gets that much worse when you realize that a 5% return rate usually comes out to about a 20% negative effect on net profit.
In its quest to chase Amazon, Walmart has adopted a similar return policy for WFS that enables the customers to process a full refund for almost any reason. Beware – this benefit will boost revenue, but it comes with a big hit to profitability.
Alternatives to Walmart Fulfillment Services
- Open Multiple Fulfillment Centers: Merchants can take it upon themselves to open multiple US fulfillment centers and control fulfillment. The benefits of total control, though, are offset by challenging market dynamics. Warehouse space has never been more limited or expensive, and hiring for frontline fulfillment workers is so competitive that Amazon is paying as much as $22.50 per hour for new employees. On top of that, opening one’s own centers for Walmart fulfillment ties up significant capital and is risky. Pick the wrong location, and you’ll be left footing the bill.
- Third-Party Logistics Companies (3PLs): Another option is to outsource fulfillment to multiple 3PLs. Since the majority of 3PLs are smaller operations with just a few locations, you’ll have to work with a few to get nationwide 1-day and 2-day coverage. Fulfillment costs vary between 3PLs, so be sure to use something like a 3PL request for proposal (RFP) template to get an apples to apples comparison.
- Deliverr: Deliverr uses a network of 3PLs to provide nationwide fast and free shipping to Walmart sellers, and if you use it to fulfill your Walmart orders, you’ll automatically qualify for the Walmart TwoDay badge. Like Walmart Fulfillment Services and other 3PLs, Deliverr does the heavy lifting of fulfillment for their clients. Also like Walmart Fulfillment Services, though, Deliverr is limited in scope. The service focuses on small packages and their fulfillment cost balloons as product size rises. They also avoid the elephant in the room, Amazon, and shy away from doing fulfillment for orders on the largest eCommerce channel. If you use their service, be prepared to add the complexity of other fulfillment solutions as you grow.
- Peer-to-Peer (P2P) Fulfillment Network: A modern and affordable alternative to working with 3PLs is to use a peer-to-peer e-commerce order fulfillment network. A P2P network is a collective of highly vetted eCommerce retailers who offer up excess warehouse space and resources to provide high-quality Walmart fulfillment to other merchants. As a result, costs are typically lower than what you get with a traditional 3PL fulfillment company, and service levels are higher. With a P2P network, flexible multi-channel fulfillment with nationwide 1-day and 2-day delivery is the norm. The diverse set of merchants ensures that each customer gets a solution customized to their need, while innovative technology ensures the highest quality fulfillment.