customers will be worth more than the storage space revenue,” says George Hatch, director of marketplaces at e-commerce accelerator Pattern. Pattern contributed to building out WFS by participating in its beta release.
Walmart entered the third-party logistics (3PL) provider space in February 2020 when it introduced Walmart Fulfillment Services (WFS), Walmart.com’s version of Fulfillment by Amazon (FBA). Both services store, pick, pack, and ship vendor merchandise and handle customer service and returns for sellers on their retail sites. Platform sellers use WFS and FBA systems to do everything from update product listings to track inventory, sales, shipping performance, and customer returns. It’s one-stop shopping for brands, allowing them to keep sales and fulfillment under one roof, literally and figuratively. For Walmart.com sellers, being able to offer free and easy store returns—90% of Americans live within 15 minutes of a Walmart store—can also increase sales by eliminating concerns about return costs and hassles. In addition, removing Walmart and Amazon fulfillment from 3PL or in-house team responsibilities lets those providers focus on optimizing fulfillment in other retail channels. One of the biggest advantages is that brands using these services will probably reduce their shipping spend. “Where Amazon has the win is in UPS package rates,” notes 3PL consultant and researcher Evan Armstrong, president of Armstrong & Associates. “It’s hard for 3PLs to replicate the incentives provided through Amazon.” For their part, Walmart and Amazon can better control the customer experience by bringing seller inventory in-house. For example, fulfilling vendor product orders lets the mammoth retailers standardize packaging and manage customer communications. Most importantly, full visibility into vendor inventory and controlling parcel carrier selection provides confidence that the retailers can meet delivery time promises. “Even if Walmart breaks even, the fact that they are able to comfortably have a two-day delivery window network nationwide and offer that to
Which sellers will benefit most from the new WFS? Those that aren’t selling their inventory directly to Walmart already. “Where it’s valuable is with items that aren’t available in stores,” Hatch says. “They can show up to a Walmart buyer with two-day badging on Walmart.com, and that availability allows brands to compete against Walmart-owned inventory.” His company documented the value through A/B testing of products from a vitamin and supplement company. After Pattern converted some of the inventory to WFS, the brand saw a 225% year-over- year sales increase on Walmart.com. Another reason to use WFS is that second- party sellers that buy products from manufacturers, then resell them on retail platforms, probably offer those products on Walmart.com already. “They might not be giving the brand experience that you want your consumers to have,” Hatch cautions. “You need to be there and own that.” In addition, inventory within WFS qualifies for free shipping to Walmart+ members and for orders greater than $35 for non-members. At the same time, it might not be a good fit for strong or premium brands that want to control their image and customer experience. “It’s pretty hard not to sell on Amazon or Walmart but for fulfillment, you have to ask, ‘How important is maintaining brand image?’” Armstrong says. Walmart’s claim that WFS is “built with sellers, for sellers” rings true, Hatch says. “We love the relationship we have with Walmart and appreciate the support they’ve given us.”
January 2022 • Inbound Logistics 169
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