Due to the increase consumer spending during the holiday season, Wal-Mart Stores and Amazon.com are preparing for the expected online spending. In early October, Wal-Mart announced that it is opening two new fulfillment centers, one in Pennsylvania and one in Texas. These new fulfillment centers will help deliver online orders to its customers faster. At the same time, Amazon said it is creating 70,000 full-time seasonal jobs across its fulfillment centers to handle the increased holiday spending. This increase comes after Amazon said it was hiring 5,000 fulfillment workers two months prior.
What does this show? For starters, the similar reactions to the increased online shopping by both Wal-Mart and Amazon proves that American consumers have changed their shopping habits. For example, research firm ComScore studied and determined that online spending during last year’s holiday season jumped 14% to $42.3 billion compared to the same period the prior year. In addition to these responses to the increased holiday spending, both Wal-Mart and Amazon also react to the increased trend of online spending even during non-peak periods. By creating two more fulfillment centers, it appears that Wal-Mart is investing in more fulfillment centers in order to react to the increasing demand of online shopping. Similarly, since its customer demand rose by 40% over the last year, Amazon expects to convert thousands of its seasonal workers into full-time employees.
http://news.investors.com/technology/100113-673225-wal-mart-amazon-move-on-christmas-shopping-season.htm
4 Comments
What will be the impact of the shift from in store to online shopping? Is it important to pay for the capital to own and operate a physical store location, or could companies cut costs by switching to only online sites and not losing customers?
One way Walmart has cut costs is through integrating vendor managed inventories throughout their supply chain. By centralizing shipping to a single warehouse from their many suppliers costs decrease and increased savings can be passed onto consumers.
In relation to Charlotte’s idea, will the shift in shopping translate to a shift in employment? It is unlikely that Walmart will close down physical locations to become an online-only retailer, but will Walmart cut back on in-store employees? This strategy might already be under way. As the Prof pointed out in class on Friday, it’s nearly impossible to find an employee in our local Walmart. Perhaps Walmart is cutting back on employees in retail locations to add employees to fulfillment centers.
I wonder if it is prudent for Wal-Mart to compete with Amazon. While Amazon is able to move a lot of products at low prices (increasing consumer surplus) they’re unable to maintain steady profit. It is contestable whether or not the online store will produce high profits later and is simply growing at the moment. Wal-Mart increasing online presence will bite into Amazon’s demand; will this create a price war? If so, which company would be the beneficiary?
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