Can Online Discounts Drive E-Commerce Sales For Wal-Mart?
Recently Wal-Mart (NYSE:WMT) announced discounts on several products listed on its e-commerce site if they are bought online using the “pick-up from store” option. The company currently has 10,000 such products on its site where discounts are applicable, and this list is likely to be extended to nearly 1 million products by the end of June. The company is passing on the savings on home delivery to customers who are willing to pick up these products from its stores. While convenience and time savings (through home delivery) are important factors for customers to opt for online shopping, a better deal available online is another key driver to attract customers towards online shopping. Attractive discounts should attract shoppers, and as they visit the company’s stores to pick up their items, they could also be tempted to shop further in the store. While this strategy has a dual benefit for Wal-Mart, the success of this initiative will depend on the actual savings customers can make via these discounts relative to the cost of picking up the item from the store.
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Higher Savings On Large Items Can Attract Customers
Wal-Mart is offering a 3-5% discount on products bought online that are picked up by customers in stores. While this does not translate into significant savings for small-ticket items (especially when the pick-up cost is considered), it can lead to higher savings on larger ticket items. Further, customers who visit Wal-Mart stores to pick up the items bought online might also end up making in-store purchases, driving revenues for the company. The company is increasing its focus on its e-commerce initiatives following the acquisition of Jet last year. Higher e-commerce sales could increase the company’s revenue per square foot, impacting its valuation positively.
Wal-Mart is looking at innovative ways to boost sales, and we believe discounted online prices could attract customers to its platform and lead them to its stores, where they could potentially buy other items. However, the actual savings through these discounts will be crucial for it to drive a meaningful increase in the company’s e-commerce revenues in the long term.
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