Online retail gets physical

There’s a great story in the Wall Street Journal today about how US retailing giant Wal-Mart is throwing down the gauntlet to the run-away global leader in online retailing, Amazon.

Wal-Mart, which is the biggest discount retailer in the US, has been stating for years that it wants to dominate online retail, but as the article points out, its claims so far proved hollow.

There’s good reasons Wal-Mart has found it impossible to chase down Amazon.

Amazon’s lack of a physical infrastructure – that is, stores and the staff to run them – mean they can cut prices without destroying margins. Also, the fact Amazon do not have stores means they can – and have – offered an incredible range of products, far greater than you could ever see in one Wal-Mart store.

Finally, there’s the convenience factor. No maddening crowds or annoying register staff at Amazon.

Many of these factors have also held down department stores – including Myer, David Jones, Target, K-Mart, Big W – back from embracing online retailing as an important part of their business.

But a few hints from Wal-Mart’s new strategy could turn that around.

Wal-Mart has started to try to exploit the big weakness of online shopping – the costs and delays associated with shipping – by using its own big strength – a giant network of well-located stores.

Customer shopping online at Wal-Mart can choose to have their goods shipped free of charge to their local Wal-Mart store, where the goods can be picked up quickly from service desks located at the front of the store, or, in one experiment, a special drive-through pick-up bay.

The company says 40% of its Christmas orders are being picked up this way.

Now, this in-store pick up idea isn’t necessarily new, but the sheer size of the Wal-Mart’s network means it is being attempted on a much bigger scale than ever before.

And it seems to me this could be a strategy that could work for our department store retailers. A discount-focused chain like Big W (which is not unlike Wal-Mart in terms of the goods its sells) could easily replicate this idea.

Shoppers get convenience of buying at home, then scoot in and pick up their stuff. The incentive of free shipping might just be enough to get a bit of critical mass going.

It’s not a perfect idea by any stretch. No doubt individual store managers striving to meet sales targets would have some problems with the idea of shoppers coming into their stores and only picking up goods online.

But as offline and online retail environments blur, Wal-Mart’s example must surely give Australia’s reluctant online retailers food for thought.