Wal-Mart’s Next Move To Compete With Amazon: Pick Up Towers

Wal-Mart (NYSE:WMT) is working aggressively to compete effectively with e-commerce giant Amazon. The competition between the two players in the grocery segment became more intense after Amazon announced the acquisition of Whole Foods. Convenience is likely to be one of the key areas where both players can win customers and drive market share (Read Is Wal-Mart Prepared To Face The Amazon-Whole Foods Combination?). In order to make its in-store pick-up process more efficient, recently Wal-Mart announced the roll out of giant self-serve kiosk towers.  These towers will deliver items through a conveyor belt, making the process human-free and much faster compared to its earlier process. While the company had begun testing of this product last year, it is now rolling out these kiosks in more stores. We believe this will give an edge to Wal-Mart on convenience and is an indication that the company continues to look for ways to compete effectively with Amazon.

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Innovations To Increase Convenience To Drive Growth

Both Wal-Mart and Amazon are counting on innovation to help them capture a higher share in the growing grocery market in the U.S., and eventually globally. Groceries account for nearly 20% of consumer spending in the U.S., and according to the Food Marketing Institute, the average U.S. consumer spends nearly $107 per week on groceries, or around $5,500 per year (which is higher than the annual spend of an Amazon Prime customer). Grocery is a $600 billion market in the U.S., and surveys suggest that more than 70% of Americans will engage in online food shopping within the next ten years. Optimistic estimates put online grocery sales growing at a CAGR (compounded annual growth rate) of 20% between 2016 and 2025. These trends indicate that consumers are finding the “click and collect” method of grocery shopping favorable and are likely to use this option more often. Wal-Mart’s investment in innovative products and services such as pick-up towers will likely bear fruit in the next decade as the company gears up to compete with Amazon on the convenience front. Grocery is a key revenue driver for Wal-Mart, and consumers are likely to prefer convenient grocery shopping options going forward. Innovative techniques which increase convenience and save time for customers will likely drive revenues for Wal-Mart in the long term .

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