Wal-Mart Offers Free Shipping with In-Store Pickup

News Analysis: Customers can order items online and have them shipped for free to local stores.

The nations largest retailer is taking the shop-online-pick-up-in-store option to the next logical point, allowing its Web site to leverage the brick-and-mortar chains logistical army.

Wal-Mart on March 6 began the first phase of its Site to Store rollout, where consumers can get purchase an item online and pick up the merchandise at a local store without paying a shipping charge.

The move is an ambitious attempt to truly offer a multichannel service. The idea is for the chain to leverage the convenience of its 3,300 stores (all of which are slated to participate "by late summer," Wal-Mart officials said) and marry it with the almost unlimited virtual inventory possible online.

"A key advantage of Wal-Marts online channel is the ability to offer a much larger assortment of products through our virtual shelf space," said Wal-Mart.coms director of store integration, Mike Smith, "while our offline channels key strengths include our nationwide footprint with more than 3,300 retail store locations and a world-class logistics network capable of efficiently delivering online products to customers at our stores."

The program is starting with a trial group of 750 stores in New Mexico, Arkansas, Oklahoma, Kansas, Nebraska, Missouri, and "select areas" of Texas, California, Colorado, Tennessee, Georgia and Mississippi, the retailer said in a statement.

One downside of the program is the speed. Once ordered, Wal-Mart is only promising to get the purchased product into the store "within 7-10 business days after the order is processed." Once the item arrives at the store, the customer receives an automatically generated e-mail saying that the item is ready for pickup.

Wal-Mart has been testing the site-to-store program for three years, officials said.

"Our extensive testing of the site-to-store service allowed us to create a multi-channel shopping experience that brings additional assortment, convenience and value to our customers," said Raul Vazquez, Walmart.coms CEO, in a statement. "We found that nearly two-thirds of the customers who used the trial service also shop in Wal-Mart stores on a weekly basis. Site-to-store not only offers these customers access to thousands of additional online products, but also gives them the added convenience of picking up those items at the store during their weekly shopping trips without paying for shipping."

Initially, only a limited number of products will be eligible, although that still translates to thousands of products impacted. Wal-Mart will mark eligible product pages to alert customers that the displayed product can be picked up at the store with free shipping. Consumers will be able to select the site-to-store option during site checkout and see how much money they saved on shipping.

Wal-Mart is also trying to brand the program as ecologically friendly. That would be a hard sell for most retailers, but with a company as large as Wal-Mart, it might make an impact.

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"The … service also supports Wal-Marts sustainability efforts. Transportation efficiencies have been realized by consolidating individual shipments into pallets and fewer trucks," Wal-Mart officials said in a statement. "Also, system upgrades allow participating suppliers to consolidate multiple items of an order into single cartons, minimizing the total number of boxes needed."

From the consumers perspective, this program is a sophisticated version of what some retailers—especially grocers—have done for decades, which is to place special orders for customers. If the product is available from a distributor the store already works with, the merchant would simply add that item to the existing bulk delivery. The customer would then pick up the item after the next regularly scheduled delivery.

This program would presumably only be of value when dealing with products the brick-and-mortar store isnt carrying. So just like the low-tech special orders of years past, this expands the inventory with products that are almost certainly going to be purchased.

It has the added benefit of giving Wal-Mart.com customers a reason to go to the store, where additional purchases are quite likely. This would be relevant to profits only when dealing with Wal-Mart.com customers who were not already Wal-Mart store customers.

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