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Wal-Mart stresses logistics, merchandising for e-commerce

Wal-Mart Stores Inc.'s strategy to compete in e-commerce relies on figuring out the online challenges to both merchandising and logistics, Marc Lore, the company's CEO and president of e-commerce U.S., said during a meeting with investors at Wal-Mart's headquarters in Bentonville, Ark., on Oct. 10.

Modern merchandising

Wal-Mart and other legacy retailers have been delivering to customers' homes for decades for products ordered via catalogs, so e-commerce's biggest new challenge for traditional brick-and-mortar retailers is grappling with a new emphasis on merchandising, Lore said.

"The internet unlocked the ability to merchandise and to produce really rich product content that never could have been done in a catalog before," Lore said in his presentation to investors.

For the top 1 million stock-keeping units, Wal-Mart has hired hundreds of category specialists who are each responsible for 500 stock-keeping units. On average, merchants are typically expected to keep track of tens of thousands of products, Lore said.

These category specialists help online customer experience, Lore said. They have the ability to show exactly what the top 10 results should be for each keyword search term and to adjust those results with new product information that the search algorithms have not picked up, he said.

Wal-Mart is also focused on elevating its online brand. The company is implementing cosmetic brand-focused measures, including new blue boxes for delivery and a planned redesign of its e-commerce platform to make it more modern.

"As we do that, we are going to start pushing up the ability to attract more premium brands," Lore said.

On a larger scale, Wal-Mart has made a number of digitally native brand acquisitions that the company thinks will resonate with urban millennial consumers, including the $310 million June purchase of men's clothing retailer Bonobos Inc.

E-commerce logistics

Wal-Mart continued to stress its physical store presence as a key advantage for the big-box retailer competing against other e-commerce operations.

About 90% of all Americans live within 10 miles of a Wal-Mart. With that infrastructure, Wal-Mart can reach 87% of the country overnight on the ground, Lore said.

Through a test with Silicon Valley startup Deliv to deliver groceries directly to customers' refrigerators, a program using Wal-Mart's own workers to deliver packages to customers, and the Oct. 3 acquisition of New York City delivery company Parcel Inc., Lore said Wal-Mart is focused on the pricey "last mile" of delivery to pick up product, in addition to the company's already extensive delivery infrastructure to move inventory to its stores.

"We're suited really well to be able to do same-day or two-hour delivery," Lore said.

The last mile is the most costly part of e-commerce delivery, Lore said. The company is continuing to push omnichannel efforts to cut down on that cost and other e-commerce logistics costs.

"There's no cheaper way to get these products to consumers than to get them to come into stores and pick it up themselves," he said. "But if they want it shipped to their home, we can give them the best price to do that."

Wal-Mart is aiming for high e-commerce growth in the coming year, announcing a goal of 40% in fiscal 2019, the company said in a press release before the investor meeting Oct. 10. Charlie O'Shea, Moody's lead retail analyst, said in a note to clients that it is an "impressive goal," although not enough to catch e-commerce giant Amazon.com Inc..

"We still believe Amazon's lead in online retail is insurmountable; however, Wal-Mart continues to widen the gap between itself and all other brick-and-mortar retailers by leveraging its unmatched physical resources, including stores and supply chain, and in the process is providing consumers with a compelling online alternative to Amazon," he said.